Table of Contents

Second

Quarter

2013

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2013

Commission file number 1-4119

 

 

NUCOR CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   13-1860817

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

1915 Rexford Road, Charlotte, North Carolina   28211
(Address of principal executive offices)   (Zip Code)

(704) 366-7000

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨    No  x

318,186,618 shares of common stock were outstanding at June 29, 2013.

 

 

 


Table of Contents

Nucor Corporation

Form 10-Q

June  29, 2013

INDEX

 

               Page  

Part I

   Financial Information   
   Item 1    Financial Statements (Unaudited)   
     

Condensed Consolidated Statements of Earnings -
Three Months (13 Weeks) and Six Months (26 Weeks) Ended June 29, 2013 and June 30, 2012

     3   
     

Condensed Consolidated Statements of Comprehensive Income -
Three Months (13 Weeks) and Six Months (26 Weeks) Ended June 29, 2013 and June 30, 2012

     4   
     

Condensed Consolidated Balance Sheets - June 29, 2013 and December 31, 2012

     5   
     

Condensed Consolidated Statements of Cash Flows -
Six Months (26 Weeks) Ended June  29, 2013 and June 30, 2012

     6   
      Notes to Condensed Consolidated Financial Statements      7   
   Item 2    Management’s Discussion and Analysis of Financial Condition and Results of Operations      21   
   Item 3    Quantitative and Qualitative Disclosures About Market Risk      30   
   Item 4    Controls and Procedures      31   

Part II

   Other Information   
   Item 1    Legal Proceedings      32   
   Item 1A    Risk Factors      32   
   Item 6    Exhibits      32   

Signatures

     33   

List of Exhibits to Form 10-Q

     34   

 

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Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Nucor Corporation Condensed Consolidated Statements of Earnings (Unaudited)

(In thousands, except per share amounts)

 

     Three Months (13 Weeks) Ended      Six Months (26 Weeks) Ended  
     June 29, 2013     June 30, 2012      June 29, 2013     June 30, 2012  

Net sales

   $ 4,665,588      $ 5,104,199       $ 9,216,360      $ 10,176,793   
  

 

 

   

 

 

    

 

 

   

 

 

 

Costs, expenses and other:

         

Cost of products sold

     4,352,463        4,704,269         8,600,019        9,396,336   

Marketing, administrative and other expenses

     123,150        112,528         239,375        219,647   

Equity in (earnings) losses of unconsolidated affiliates

     (1,585     158         (413     6,832   

Impairment of non-current assets

            30,000                30,000   

Interest expense, net

     39,228        41,051         71,719        82,723   
  

 

 

   

 

 

    

 

 

   

 

 

 
     4,513,256        4,888,006         8,910,700        9,735,538   
  

 

 

   

 

 

    

 

 

   

 

 

 

Earnings before income taxes and noncontrolling interests

     152,332        216,193         305,660        441,255   

Provision for income taxes

     46,062        76,626         88,662        138,276   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net earnings

     106,270        139,567         216,998        302,979   

Earnings attributable to noncontrolling interests

     21,125        27,268         47,064        45,576   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net earnings attributable to Nucor stockholders

   $ 85,145      $ 112,299       $ 169,934      $ 257,403   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net earnings per share:

         

Basic

   $ 0.27      $ 0.35       $ 0.53      $ 0.81   

Diluted

   $ 0.27      $ 0.35       $ 0.53      $ 0.81   

Average shares outstanding:

         

Basic

     318,903        317,975         318,796        317,832   

Diluted

     319,023        318,040         318,934        317,910   

Dividends declared per share

   $ 0.3675      $ 0.3650       $ 0.735      $ 0.730   

See notes to condensed consolidated financial statements.

 

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Table of Contents

Nucor Corporation Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     June 29, 2013     June 30, 2012     June 29, 2013     June 30, 2012  

Net earnings

   $ 106,270      $ 139,567      $ 216,998      $ 302,979   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss):

        

Net unrealized loss on hedging derivatives, net of income taxes of $0 and $0 for the second quarter of 2013 and 2012, respectively, and $0 and ($1,100) for the first six months of 2013 and 2012, respectively

                          (2,264

Reclassification adjustment for loss on settlement of hedging derivatives included in net income, net of income taxes of $0 and $6,200 for the second quarter of 2013 and 2012, respectively, and $0 and $12,600 for the first six months of 2013 and 2012, respectively

            10,553               21,407   

Foreign currency translation gain (loss), net of income taxes of ($200) and $0 for the second quarter of 2013 and 2012, respectively, and ($200) and $0 for the first six months of 2013 and 2012, respectively

     (15,582     (55,433     (66,095     (1,381
  

 

 

   

 

 

   

 

 

   

 

 

 
     (15,582     (44,880     (66,095     17,762   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     90,688        94,687        150,903        320,741   

Comprehensive income attributable to
noncontrolling interests

     (21,125     (27,232     (47,064     (45,512
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to
Nucor stockholders

   $ 69,563      $ 67,455      $ 103,839      $ 275,229   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

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Nucor Corporation Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

 

     June 29, 2013     Dec. 31, 2012  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 630,467      $ 1,052,862   

Short-term investments

     47,656        104,167   

Accounts receivable, net

     1,767,177        1,707,317   

Inventories, net

     2,279,744        2,323,641   

Other current assets

     458,119        473,377   
  

 

 

   

 

 

 

Total current assets

     5,183,163        5,661,364   

Property, plant and equipment, net

     4,608,997        4,283,056   

Restricted cash and investments

     71,083        275,163   

Goodwill

     1,983,107        2,004,538   

Other intangible assets, net

     912,708        959,240   

Other assets

     1,007,593        968,698   
  

 

 

   

 

 

 

Total assets

   $ 13,766,651      $ 14,152,059   
  

 

 

   

 

 

 

LIABILITIES

    

Current liabilities:

    

Short-term debt

   $ 31,668      $ 29,912   

Long-term debt due within one year

            250,000   

Accounts payable

     979,220        1,046,713   

Salaries, wages and related accruals

     240,629        279,898   

Accrued expenses and other current liabilities

     489,059        423,045   
  

 

 

   

 

 

 

Total current liabilities

     1,740,576        2,029,568   

Long-term debt due after one year

     3,380,200        3,380,200   

Deferred credits and other liabilities

     874,645        856,917   
  

 

 

   

 

 

 

Total liabilities

     5,995,421        6,266,685   
  

 

 

   

 

 

 

EQUITY

    

Nucor stockholders’ equity:

    

Common stock

     150,962        150,805   

Additional paid-in capital

     1,835,746        1,811,459   

Retained earnings

     7,058,911        7,124,523   

Accumulated other comprehensive (loss) income, net of income taxes

     (9,334     56,761   

Treasury stock

     (1,498,656     (1,501,977
  

 

 

   

 

 

 

Total Nucor stockholders’ equity

     7,537,629        7,641,571   

Noncontrolling interests

     233,601        243,803   
  

 

 

   

 

 

 

Total equity

     7,771,230        7,885,374   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 13,766,651      $ 14,152,059   
  

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

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Nucor Corporation Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

     Six Months (26 Weeks) Ended  
     June 29,
2013
    June 30,
2012
 

Operating activities:

    

Net earnings

   $ 216,998      $ 302,979   

Adjustments:

    

Depreciation

     258,390        260,968   

Amortization

     37,575        33,122   

Stock-based compensation

     34,043        37,312   

Deferred income taxes

     12,304        (23,144

Distribution from affiliates

     7,708          

Equity in (earnings) losses of unconsolidated affiliates

     (413     6,832   

Impairment of non-current assets

            30,000   

Changes in assets and liabilities (exclusive of acquisitions and dispositions):

    

Accounts receivable

     (70,785     (76,245

Inventories

     36,087        (152,494

Accounts payable

     (44,724     42,394   

Federal income taxes

     3,709        3,364   

Salaries, wages and related accruals

     (35,332     (82,991

Other

     29,414        64,389   
  

 

 

   

 

 

 

Cash provided by operating activities

     484,974        446,486   
  

 

 

   

 

 

 

Investing activities:

    

Capital expenditures

     (621,306     (383,448

Investment in and advances to affiliates

     (43,485     (57,771

Repayment of advances to affiliates

     30,500        15,000   

Disposition of plant and equipment

     10,145        21,026   

Acquisitions (net of cash acquired)

            (746,410

Purchases of investments

     (19,390     (409,403

Proceeds from the sale of investments

     73,428        1,200,153   

Proceeds from the sale of restricted investments

     148,725        87,115   

Changes in restricted cash

     55,355        7,078   
  

 

 

   

 

 

 

Cash used in investing activities

     (366,028     (266,660
  

 

 

   

 

 

 

Financing activities:

    

Net change in short-term debt

     1,796        5,234   

Repayment of long-term debt

     (250,000       

Issuance of common stock

            6,156   

Excess tax benefits from stock-based compensation

     1,700        3,877   

Distributions to noncontrolling interests

     (57,266     (52,812

Cash dividends

     (235,280     (232,766

Other financing activities

     109        670   
  

 

 

   

 

 

 

Cash used in financing activities

     (538,941     (269,641
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (2,400     1,159   
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (422,395     (88,656

Cash and cash equivalents—beginning of year

     1,052,862        1,200,645   
  

 

 

   

 

 

 

Cash and cash equivalents—end of six months

   $ 630,467      $ 1,111,989   
  

 

 

   

 

 

 

Non-cash investing activity:

    

Change in accrued plant and equipment purchases

   $ (20,537   $   
  

 

 

   

 

 

 

See notes to condensed consolidated financial statements.

 

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Nucor Corporation – Notes to Condensed Consolidated Financial Statements (Unaudited)

 

1. BASIS OF INTERIM PRESENTATION: The information furnished in Item I reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods and are of a normal and recurring nature unless otherwise noted. The information furnished has not been audited; however, the December 31, 2012 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited condensed consolidated financial statements in this Item 1 should be read in conjunction with the consolidated financial statements and the notes thereto included in Nucor’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Recently Adopted Accounting Pronouncements — In the first quarter of 2013, Nucor adopted new accounting guidance requiring additional disclosures on reclassifications from accumulated other comprehensive income into net income. The new accounting guidance requires entities to report either parenthetically on the face of the financial statements or in the notes to the financial statements these reclassifications for each financial statement line item. Nucor elected to report this information within the notes to the financial statements. This new guidance only impacts disclosures and has no impact on Nucor’s consolidated financial position, results of operations or cash flows.

In the first quarter of 2014, Nucor will adopt new accounting guidance which requires unrecognized tax benefits to be presented as a decrease in net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. The new guidance may affect balance sheet classification of certain unrecognized tax benefits and will have no impact on Nucor’s consolidated results of operations or cash flows.

 

2. INVENTORIES: Inventories consisted of approximately 36% raw materials and supplies and 64% finished and semi-finished products at June 29, 2013 (37% and 63%, respectively, at December 31, 2012). Nucor’s manufacturing process consists of a continuous, vertically integrated process from which products are sold to customers at various stages throughout the process. Since most steel products can be classified as either finished or semi-finished products, these two categories of inventory are combined.

Inventories valued using the last-in, first-out (LIFO) method of accounting represented approximately 45% of total inventories as of June 29, 2013 (45% as of December 31, 2012). If the first-in, first-out (FIFO) method of accounting had been used, inventories would have been $625.2 million higher at June 29, 2013 ($607.2 million higher at December 31, 2012). Use of the lower of cost or market methodology reduced inventories by $4.4 million at June 29, 2013 ($3.5 million at December 31, 2012).

 

3. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is recorded net of accumulated depreciation of $6.4 billion at June 29, 2013 ($6.16 billion at December 31, 2012).

 

4. RESTRICTED CASH AND INVESTMENTS: As of June 29, 2013, restricted cash consisted of net proceeds from $600.0 million 30-year variable rate Gulf Opportunity Zone bonds issued in November 2010. The restricted cash is held in a trust account and is to be used to fund part of the capital costs associated with the construction of Nucor’s direct reduced iron making facility in St. James Parish, Louisiana. Funds are disbursed as qualified expenditures for the construction of the facility are made ($204.2 million and $94.9 million in the first six months of 2013 and 2012, respectively). There were no restricted investments held as of June 29, 2013 ($149.8 million at December 31, 2012). Since the restricted cash must be used for the construction of the facility, the entire balance has been classified as a non-current asset.

 

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5. GOODWILL AND OTHER INTANGIBLE ASSETS: The change in the net carrying amount of goodwill for the six months ended June 29, 2013 by segment is as follows (in thousands):

 

     Steel Mills      Steel Products     Raw Materials      All Other     Total  

Balance at December 31, 2012

   $ 407,045       $ 805,416      $ 703,225       $ 88,852      $ 2,004,538   

Acquisitions

                                     

Reclassifications

     88,852                        (88,852       

Translation

             (21,431                    (21,431
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Balance at June 29, 2013

   $ 495,897       $ 783,985      $ 703,225       $      $ 1,983,107   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Previously Nucor’s steel trading businesses and rebar distribution businesses were reported in the “All other” category. Beginning in the first quarter of 2013, these businesses were reclassified to the steel mills segment as part of a realignment of Nucor’s reportable segments to better reflect the way in which they are managed.

Nucor completed its annual goodwill impairment testing during the fourth quarter of 2012 and concluded that there was no impairment of goodwill for any of its reporting units.

Intangible assets with estimated useful lives of three to 22 years are amortized on a straight-line or accelerated basis and were comprised of the following (in thousands):

 

     June 29, 2013      December 31, 2012  
     Gross
Amount
     Accumulated
Amortization
     Gross
Amount
     Accumulated
Amortization
 

Customer relationships

   $ 1,149,296       $ 358,844       $ 1,156,979       $ 325,819   

Trademarks and trade names

     151,594         36,615         152,869         32,653   

Other

     21,869         14,592         28,610         20,746   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,322,759       $ 410,051       $ 1,338,458       $ 379,218   
  

 

 

    

 

 

    

 

 

    

 

 

 

Intangible asset amortization expense in the second quarter of 2013 and 2012 was $18.6 million and $16.5 million, respectively, and was $37.6 million and $33.1 million in the first six months of 2013 and 2012, respectively. Annual amortization expense is estimated to be $73.4 million in 2013; $70.0 million in 2014; $68.2 million in 2015; $66.5 million in 2016; and $64.8 million in 2017.

 

6. EQUITY INVESTMENTS: The carrying value of our equity investments in domestic and foreign companies was $886.2 million at June 29, 2013 ($855.9 million at December 31, 2012) and is recorded in other assets in the condensed consolidated balance sheets.

DUFERDOFIN NUCOR

Nucor owns a 50% economic and voting interest in Duferdofin Nucor S.r.l. (Duferdofin Nucor), an Italian steel manufacturer, and accounts for the investment (on a one-month lag basis) under the equity method, as control and risk of loss are shared equally between the members.

Nucor’s investment in Duferdofin Nucor at June 29, 2013 was $440.7 million ($454.1 million at December 31, 2012). Nucor’s 50% share of the total net assets of Duferdofin Nucor was $48.7 million at June 29, 2013, resulting in a basis difference of $392.0 million due to the step-up to fair value of certain assets and liabilities attributable to Duferdofin Nucor as well as the identification of goodwill ($314.9 million) and finite-lived intangible assets. This basis difference, excluding the portion attributable to goodwill, is being amortized based on the remaining estimated useful lives of the various underlying net assets, as appropriate. Amortization expense and other purchase accounting adjustments associated with the fair value step-up were $2.8 million in both the second quarter of 2013 and 2012, respectively, and were $5.7 million and $5.6 million in the first six months of 2013 and 2012, respectively.

 

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As of June 29, 2013, Nucor had outstanding notes receivable of €35.0 million ($45.6 million) from Duferdofin Nucor (€35.0 million at December 31, 2012). The notes receivable bear interest at 1.69% and will reset annually on September 30 to the twelve-month Euro Interbank Offered Rate (Euribor) plus 1% per year. The principal amounts are due on January 31, 2016. Accordingly, the notes receivable were classified in other assets in the condensed consolidated balance sheets as of June 29, 2013.

Nucor has issued a guarantee for its ownership percentage (50%) of Duferdofin Nucor’s borrowings under Facility A of a Structured Trade Finance Facilities Agreement that matures on April 26, 2016. In the second quarter of 2013, Duferdofin Nucor amended the loan agreement, increasing the maximum amount that it can borrow under Facility A to €122.5 million (or $159.8 million as of June 29, 2013). As of June 29, 2013, it had €108.0 million ($140.8 million) outstanding under that facility (€102.0 million, or $134.8 million, at December 31, 2012). If Duferdofin Nucor fails to pay when due any amounts for which it is obligated under Facility A, Nucor could be required to pay 50% of such amounts pursuant to and in accordance with the terms of its guarantee. Any indebtedness of Duferdofin Nucor to Nucor is effectively subordinated to the indebtedness of Duferdofin Nucor under the Structured Trade Finance Facilities Agreement. Nucor has not recorded any liability associated with the guarantee.

NUMIT

Nucor has a 50% economic and voting interest in NuMit LLC (NuMit). NuMit owns 100% of the equity interest in Steel Technologies LLC, an operator of 23 sheet processing facilities located throughout the U.S., Canada and Mexico. Nucor accounts for the investment in NuMit (on a one-month lag basis) under the equity method as control and risk of loss are shared equally between the members. The acquisition did not result in a significant amount of goodwill or intangible assets.

Nucor’s investment in NuMit at June 29, 2013 was $297.3 million ($288.4 million as of December 31, 2012). The value of the investment is comprised of the purchase price of approximately $221.3 million plus subsequent additional capital contributions and equity method earnings less distributions since acquisition. Nucor also has recorded a $40.0 million note receivable from Steel Technologies LLC that bears interest at 1.18% as of June 29, 2013 and resets quarterly to the three-month London Interbank Offered Rate (LIBOR) plus 90 basis points. The principal amount is due on October 21, 2014. In addition, Nucor has extended a $100.0 million line of credit (of which $16.5 million was outstanding at June 29, 2013) to Steel Technologies LLC. As of June 29, 2013, the amounts outstanding on the line of credit bear interest at 1.21% and mature on April 1, 2014. The note receivable was classified in other assets and the amount outstanding on the line of credit was classified in other current assets in the condensed consolidated balance sheets.

HUNTER RIDGE

In November 2012, Nucor acquired a 50% economic and voting interest in Hunter Ridge Energy Services LLC (Hunter Ridge). Hunter Ridge provides services for the gathering, separation and compression of energy products including natural gas produced by Nucor’s working interest drilling program. Nucor accounts for the investment (on a one-month lag basis) under the equity method, as control and risk of loss are shared equally between the members. Nucor’s investment in Hunter Ridge at June 29, 2013 was $130.6 million ($95.4 million at December 31, 2012). The acquisition did not result in a significant amount of goodwill or intangible assets.

ALL EQUITY INVESTMENTS

Nucor reviews its equity investments for impairment if and when circumstances indicate that a decline in value below their carrying amounts may have occurred. In the second quarter of 2012, Nucor concluded that a triggering event occurred, requiring assessment for impairment of the equity investment in Duferdofin Nucor due to the continued declines in the global demand for steel, the escalated economic and political turmoil in Europe and continued operating performance well below budgeted levels through the first half of 2012. Duferdofin Nucor had a recently updated unfavorable forecast of future operating performance that was also a contributing factor. The diminished demand combined with the continued lower than budgeted levels of operating performance significantly

 

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impacted the financial results of Duferdofin Nucor through the first half of 2012. After completing its assessment, Nucor determined that the carrying amount exceeded its estimated fair value and recorded a $30.0 million impairment charge against the Company’s investment in Duferdofin Nucor.

In the fourth quarter of 2012, Nucor assessed its equity investment in Duferdofin Nucor for impairment. After completing its assessment, the Company determined that the estimated fair value exceeded its carrying amount and that there was no need for impairment. The assumptions that most significantly affect the fair value determination include projected revenues and the discount rate. Steel market conditions in Europe have continued to be challenging through the second quarter of 2013, and, therefore, it is reasonably possible that based on actual performance in the near term the estimates used in our fourth quarter valuation could change and result in further impairment of our investment in Duferdofin Nucor.

 

7. CURRENT LIABILITIES: Book overdrafts, included in accounts payable in the condensed consolidated balance sheets, were $80.2 million at June 29, 2013 ($53.8 million at December 31, 2012). Dividends payable, included in accrued expenses and other current liabilities in the condensed consolidated balance sheets, were $117.9 million at June 29, 2013 ($117.6 million at December 31, 2012).

 

8. DERIVATIVES: Nucor periodically uses derivative financial instruments primarily to partially manage its exposure to price risk related to natural gas purchases used in the production process as well as to scrap, copper and aluminum purchased for resale to its customers. In addition, Nucor periodically uses derivatives to partially manage its exposure to changes in interest rates on outstanding debt instruments and uses forward foreign exchange contracts to hedge cash flows associated with certain assets and liabilities, firm commitments and anticipated transactions.

Nucor recognizes all derivative instruments in the condensed consolidated balance sheets at fair value. Any resulting changes in fair value are recorded as adjustments to other comprehensive income (loss), net of tax, or recognized in net earnings, as appropriate.

The following tables summarize information regarding Nucor’s derivative instruments (in thousands):

Fair Value of Derivative Instruments

 

          Fair Value at  
    

Balance Sheet Location

   June 29, 2013      Dec. 31, 2012  

Asset derivatives not designated as hedging instruments:

        

Commodity contracts

   Other current assets    $ 1,431       $   

Foreign exchange contracts

   Other current assets      10           
     

 

 

    

 

 

 

Total asset derivatives

      $ 1,441       $   
     

 

 

    

 

 

 

Liability derivatives not designated as hedging instruments:

        

Commodity contracts

   Accrued expenses and other current liabilities    $       $ (303

Foreign exchange contracts

   Accrued expenses and other current liabilities              (15
     

 

 

    

 

 

 

Total liability derivatives

      $       $ (318
     

 

 

    

 

 

 

 

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The Effect of Derivative Instruments on the Condensed Consolidated Statements of Earnings

Derivatives Designated as Hedging Instruments

 

            Amount of Gain
or  (Loss)
Recognized in OCI
on Derivatives
(Effective Portion)
     Amount of Gain
or  (Loss)
Reclassified from
Accumulated OCI into
Earnings

(Effective Portion)
    Amount of Gain
or  (Loss)
Recognized in

Earnings on
Derivatives
(Ineffective Portion)
 

Derivatives in Cash Flow Hedging

Relationships

  

Statement of Earnings

Location

     Three Months
(13 weeks) Ended
     Three Months
(13 weeks) Ended
    Three Months
(13 weeks)  Ended
 
      June 29,
2013
     June 30,
2012
     June 29,
2013
     June 30,
2012
    June 29,
2013
     June 30,
2012
 

Commodity contracts

     Cost of products sold       $       $       $       $ (10,553   $       $   
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

            Amount of Gain
or  (Loss)
Recognized in OCI
on Derivatives
(Effective Portion)
    Amount of Gain
or  (Loss)
Reclassified from
Accumulated OCI into
Earnings
(Effective Portion)
    Amount of Gain
or  (Loss)
Recognized in

Earnings on
Derivatives

(Ineffective Portion)
 

Derivatives in Cash Flow Hedging

Relationships

   Statement of Earnings
Location
     Six Months
(26 weeks) Ended
    Six Months
(26 weeks) Ended
    Six Months
(26 weeks) Ended
 
      June 29,
2013
     June 30,
2012
    June 29,
2013
     June 30,
2012
    June 29,
2013
     June 30,
2012
 

Commodity contracts

     Cost of products sold       $       $ (2,264   $       $ (21,407   $       $ 500   
     

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Derivatives Not Designated as Hedging Instruments

 

            Amount of Gain or (Loss) Recognized in Earnings on  Derivatives  
            Three Months (13 weeks) Ended      Six Months (26 weeks) Ended  

Derivatives Not Designated as

Hedging Instruments

   Statement of
Earnings  Location
     June 29, 2013      June 30, 2012      June 29,
2013
     June 30,
2012
 

Commodity contracts

     Cost of products sold       $  2,473       $  2,573       $  4,982       $  1,223   

Foreign exchange contracts

     Cost of products sold         2         114         118         171   
     

 

 

    

 

 

    

 

 

    

 

 

 

Total

      $ 2,475       $ 2,687       $ 5,100       $ 1,394   
     

 

 

    

 

 

    

 

 

    

 

 

 

During the first quarter of 2012, Nucor settled all of its open natural gas forward purchase contracts that were previously in place. These settlements affected earnings over the periods specified in the original agreements throughout the remainder of 2012.

 

9. FAIR VALUE MEASUREMENTS: The following table summarizes information regarding Nucor’s financial assets and financial liabilities that were measured at fair value as of June 29, 2013 and December 31, 2012 (in thousands). Nucor does not currently have any non-financial assets or liabilities that are measured at fair value on a recurring basis.

 

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Description

   Carrying
Amount in
Condensed
Consolidated
Balance Sheets
    Fair Value Measurements at Reporting Date Using  
     Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
     Significant
Other
Observable
Inputs

(Level 2)
    Significant
Unobservable
Inputs

(Level 3)
 

As of June 29, 2013

         

Assets:

         

Cash equivalents

   $ 505,167      $ 505,167       $      $   

Short-term investments

     47,656        47,656                  

Restricted cash

     71,083        71,083                  

Foreign exchange and commodity contracts

     1,441                1,441          
  

 

 

   

 

 

    

 

 

   

 

 

 

Total assets

   $ 625,347      $ 623,906       $ 1,441      $   
  

 

 

   

 

 

    

 

 

   

 

 

 

As of December 31, 2012

         

Assets:

         

Cash equivalents

   $ 830,011      $ 830,011       $      $   

Short-term investments

     104,167        104,167                  

Restricted cash and investments

     275,163        275,163                  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,209,341      $ 1,209,341       $      $   
  

 

 

   

 

 

    

 

 

   

 

 

 

Liabilities:

         

Foreign exchange and commodity contracts

   $ (318   $       $ (318   $   
  

 

 

   

 

 

    

 

 

   

 

 

 

Fair value measurements for Nucor’s cash equivalents, short-term investments and restricted cash and investments are classified under Level 1 because such measurements are based on quoted market prices in active markets for identical assets. Our short-term investments are held in similar short-term investment instruments as described in Note 4 to Nucor’s annual report for the year ended December 31, 2012. Fair value measurements for Nucor’s derivatives are classified under Level 2 because such measurements are based on published market prices for similar assets or are estimated based on observable inputs such as interest rates, yield curves, credit risks, spot and future commodity prices, and spot and future exchange rates.

The fair value of short-term and long-term debt, including current maturities, was approximately $3.71 billion at June 29, 2013 ($4.24 billion at December 31, 2012). The debt fair value estimates are classified under Level 2 because such estimates are based on readily available market prices of our debt at June 29, 2013 and December 31, 2012, or similar debt with the same maturities, rating and interest rates.

 

10. CONTINGENCIES: Nucor is subject to environmental laws and regulations established by federal, state and local authorities and, accordingly, makes provision for the estimated costs of compliance. Of the undiscounted total of $24.7 million of accrued environmental costs at June 29, 2013 ($26.5 million at December 31, 2012), $8.7 million was classified in accrued expenses and other current liabilities ($9.5 million at December 31, 2012) and $16.0 million was classified in deferred credits and other liabilities ($17.0 million at December 31, 2012). Inherent uncertainties exist in these estimates primarily due to unknown conditions, evolving remediation technology, and changing governmental regulations and legal standards.

 

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Nucor has been named, along with other major steel producers, as a co-defendant in several related antitrust class-action complaints filed by Standard Iron Works and other steel purchasers in the United States District Court for the Northern District of Illinois. The majority of these complaints were filed in September and October of 2008, with two additional complaints being filed in July and December of 2010. Two of these complaints have been voluntarily dismissed and are no longer pending. The plaintiffs allege that from April 1, 2005 through December 31, 2007, eight steel manufacturers, including Nucor, engaged in anticompetitive activities with respect to the production and sale of steel. The plaintiffs seek monetary and other relief. Although we believe the plaintiffs’ claims are without merit and will vigorously defend against them, we cannot at this time predict the outcome of this litigation or estimate the range of Nucor’s potential exposure.

Nucor is involved in various other judicial and administrative proceedings as both plaintiff and defendant, arising in the ordinary course of business. Nucor maintains liability insurance for certain risks that is subject to certain self-insurance limits. Although the outcome of the proceedings against us cannot be predicted with certainty, we do not believe that any of these proceedings would be expected to have a material adverse effect on the consolidated financial statements.

 

11. DEBT – During the second quarter of 2013, Nucor recorded a note payable with a principal amount of $100.0 million to Nucor-Yamato Steel Company (NYS), a limited partnership of which Nucor owns 51%. The note bears interest at the Fidelity Institutional Money Market Fund – Prime Money Market Portfolio Fund 2014 rate, which changes daily. At June 29, 2013, this rate was 0.09% on an annualized basis. As the condensed consolidated balance sheets include Nucor and its controlled subsidiaries, including NYS, this intercompany note had no impact on the condensed consolidated financial statements.

 

12. STOCK-BASED COMPENSATION: Stock Options – Stock options may be granted to Nucor’s key employees, officers and non-employee directors with exercise prices at 100% of the market value on the date of the grant. The stock options granted from 2010 through 2013 are exercisable at the end of three years and have a term of 10 years. All stock options granted prior to 2010 were fully exercised as of June 29, 2013. New shares are issued upon exercise of stock options.

A summary of activity under Nucor’s stock option plans for the first six months of 2013 is as follows (in thousands, except year and per share amounts):

 

     Shares      Weighted -
Average
Exercise
Price
     Weighted -
Average
Remaining
Contractual Life
     Aggregate
Intrinsic
Value
 

Number of shares under option:

           

Outstanding at beginning of year

     1,543       $ 39.03         

Granted

     546       $ 44.51         

Exercised

                     

Canceled

                     
  

 

 

          

Outstanding at June 29, 2013

     2,089       $ 40.47         8.7 years       $ 6,612   
  

 

 

          

Options exercisable at June 29, 2013

     242       $ 41.43         6.9 years       $ 457   
  

 

 

          

For the 2013 stock option grant, the grant date fair value of $15.03 per share was calculated using the Black-Scholes option-pricing model with the following assumptions:

 

Exercise price

   $ 44.51   

Expected dividend yield

     3.30

Expected stock price volatility

     46.94

Risk-free interest rate

     1.51

Expected life (years)

     6.5   

 

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Compensation expense for stock options was $8.4 million and $8.9 million in the second quarter of 2013 and 2012, respectively, and $8.6 million and $9.2 million in the first six months of 2013 and 2012, respectively. As of June 29, 2013, all expense related to options had been recognized.

Restricted Stock Units Nucor annually grants restricted stock units (“RSUs”) to key employees, officers and non-employee directors. The RSUs typically vest and are converted to common stock in three equal installments on each of the first three anniversaries of the grant date. A portion of the RSUs awarded to senior officers vest upon the officer’s retirement. Retirement, for purposes of vesting in these RSUs only, means termination of employment with approval of the Compensation and Executive Development Committee of the Board of Directors after satisfying age and years of service requirements. RSUs granted to non-employee directors are fully vested on the grant date and are payable to the non-employee director in the form of common stock after the termination of the director’s service on the board of directors.

RSUs granted to employees who are eligible for retirement on the date of grant are expensed immediately, and RSUs granted to employees who will become retirement-eligible prior to the end of the vesting term are expensed over the period through which the employee will become retirement-eligible since these awards vest upon retirement from the Company. Compensation expense for RSUs granted to employees who are not retirement-eligible is recognized on a straight-line basis over the vesting period.

Cash dividend equivalents are paid to participants each quarter. Dividend equivalents paid on units expected to vest are recognized as a reduction in retained earnings.

The fair value of the RSUs is determined based on the closing stock price of Nucor’s common stock on the day before the grant. A summary of Nucor’s RSU activity for the first six months of 2013 is as follows (shares in thousands):

 

     Shares     Grant Date
Fair Value
 

Restricted stock units:

    

Unvested at beginning of year

     1,106      $ 40.80   

Granted

     789      $ 44.51   

Vested

     (744   $ 42.19   

Canceled

     (6   $ 38.14   
  

 

 

   

Unvested at June 29, 2013

     1,145      $ 42.47   
  

 

 

   

Shares reserved for future grants (stock options and RSUs)

     10,503     
  

 

 

   

Compensation expense for RSUs was $18.1 million and $20.1 million in the second quarter of 2013 and 2012, respectively, and $22.2 million and $24.9 million in the first six months of 2013 and 2012, respectively. As of June 29, 2013, unrecognized compensation expense related to unvested RSUs was $39.5 million, which is expected to be recognized over a weighted-average period of 2.6 years.

Restricted Stock Awards Nucor’s Senior Officers Long-Term Incentive Plan (the “LTIP”) and Annual Incentive Plan (the “AIP”) authorize the award of shares of common stock to officers subject to certain conditions and restrictions.

The LTIP provides for the award of shares of restricted common stock at the end of each LTIP performance measurement period at no cost to officers if certain financial performance goals are met during the period. One-third of the LTIP restricted stock award vests upon each of the first three anniversaries of the award date or, if earlier, upon the officer’s attainment of age fifty-five while employed by Nucor. Although participants are entitled to cash dividends and may vote such awarded shares, the sale or transfer of such shares is limited during the restricted period.

 

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The AIP provides for the payment of annual cash incentive awards. An AIP participant may elect, however, to defer payment of up to one-half of an annual incentive award. In such event, the deferred AIP award is converted into common stock units and credited with a deferral incentive, in the form of additional common stock units, equal to 25% of the number of common stock units attributable to the deferred AIP award. Common stock units attributable to deferred AIP awards are fully vested. Common stock units credited as a deferral incentive vest upon the AIP participant’s attainment of age fifty-five while employed by Nucor. Vested common stock units are paid to AIP participants in the form of shares of common stock following their termination of employment with Nucor.

A summary of Nucor’s restricted stock activity under the AIP and LTIP for the first six months of 2013 is as follows (shares in thousands):

 

      Shares     Grant Date
Fair Value
 

Restricted stock awards and units:

    

Unvested at beginning of year

     72      $ 43.72   

Granted

     122      $ 47.36   

Vested

     (119   $ 46.31   

Canceled

              
  

 

 

   

Unvested at June 29, 2013

     75      $ 45.53   
  

 

 

   

Shares reserved for future grants

     1,238     
  

 

 

   

Compensation expense for common stock and common stock units awarded under the AIP and LTIP is recorded over the performance measurement and vesting periods based on the anticipated number and market value of shares of common stock and common stock units to be awarded. Compensation expense for anticipated awards based upon Nucor’s financial performance, exclusive of amounts payable in cash, was $1.5 million and $1.4 million in the second quarter of 2013 and 2012, respectively, and $3.3 million and $3.1 million in the first six months of 2013 and 2012, respectively. At June 29, 2013, unrecognized compensation expense related to unvested restricted stock awards was $1.1 million, which is expected to be recognized over a weighted-average period of 1.9 years.

 

13. EMPLOYEE BENEFIT PLAN: Nucor makes contributions to a Profit Sharing and Retirement Savings Plan for qualified employees based on the profitability of the Company. Nucor’s expense for these benefits was $13.1 million and $17.9 million in the second quarter of 2013 and 2012, respectively, and was $26.7 million and $40.6 million in the first six months of 2013 and 2012, respectively. The related liability for these benefits is included in salaries, wages and related accruals.

 

14. INTEREST EXPENSE (INCOME): The components of net interest expense are as follows (in thousands):

 

      Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     June 29, 2013     June 30, 2012     June 29, 2013     June 30, 2012  

Interest expense

   $  40,676      $  44,318      $  74,356      $  89,300   

Interest income

     (1,448     (3,267     (2,637     (6,577
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense, net

   $ 39,228      $ 41,051      $ 71,719      $ 82,723   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

15.

INCOME TAXES: The effective tax rate for the second quarter of 2013 was 30.2% compared to 35.4% for the second quarter of 2012. The decrease in the effective tax rate for the second quarter of 2013 is due to the tax impact of the Duferdofin Nucor impairment charge being fully recorded in the second quarter of 2012. Nucor has concluded U.S. federal income tax matters for years through 2008. The years 2004, 2007, and 2008 are open to the extent net operating losses were carried back. The 2009 to 2012 tax years are open to examination by the Internal Revenue Service. In 2011 the Canada Revenue Agency

 

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Table of Contents
  completed an audit examination for the periods 2006 to 2008 for Harris Steel Group Inc. and subsidiaries with immaterial adjustments to the income tax returns. The tax years 2009 through 2012 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and other state and local jurisdictions).

Current deferred tax assets included in other current assets were $198.5 million at June 29, 2013 ($190.4 million at December 31, 2012). Current deferred tax liabilities included in accrued expenses and other current liabilities were $12.7 million at June 29, 2013 (none at December 31, 2012). Non-current deferred tax liabilities included in deferred credits and other liabilities were $571.3 million at June 29, 2013 ($566.1 million at December 31, 2012).

 

16. STOCKHOLDERS’ EQUITY: The following tables reflect the changes in stockholders’ equity attributable to both Nucor and the noncontrolling interests of Nucor’s joint ventures, primarily Nucor-Yamato Steel Company, of which Nucor owns 51% (in thousands):

 

     Attributable to
Nucor  Corporation
    Attributable to
Noncontrolling Interests
    Total  

Stockholders’ equity at December 31, 2012

   $ 7,641,571      $ 243,803      $  7,885,374   

Total comprehensive income

     103,839        47,064        150,903   

Stock options

     8,575               8,575   

Issuance of stock under award plans, net of forfeitures

     18,789               18,789   

Amortization of unearned compensation

     400               400   

Dividends declared

     (235,545            (235,545

Distributions to noncontrolling interests

            (57,266     (57,266
  

 

 

   

 

 

   

 

 

 

Stockholders’ equity at June 29, 2013

   $  7,537,629      $  233,601      $ 7,771,230   
  

 

 

   

 

 

   

 

 

 
     Attributable to
Nucor Corporation
    Attributable to
Noncontrolling Interests
    Total  

Stockholders’ equity at December 31, 2011

   $ 7,474,885      $ 231,695      $ 7,706,580   

Total comprehensive income

     275,229        45,512        320,741   

Stock options

     15,381               15,381   

Issuance of stock under award plans, net of forfeitures

     26,029               26,029   

Amortization of unearned compensation

     500               500   

Dividends declared

     (233,216            (233,216

Distributions to noncontrolling interests

            (52,812     (52,812

Other

     (644            (644
  

 

 

   

 

 

   

 

 

 

Stockholders’ equity at June 30, 2012

   $ 7,558,164      $ 224,395      $ 7,782,559   
  

 

 

   

 

 

   

 

 

 

 

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17. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME: The following tables reflect the changes in accumulated other comprehensive (loss) income by component (in thousands):

 

    

Three Month (13 week) Period Ended

June 29, 2013

 
     Gains and Losses on
Hedging Derivatives
     Foreign Currency
Gain (Loss)
    Adjustment to Early
Retiree Medical Plan
     Total  

March 30, 2013

   $       $ (4,332   $ 10,580       $        6,248   

Other comprehensive (loss) income before reclassifications

             (15,582             (15,582

Amounts reclassified from accumulated other comprehensive (loss) income into earnings

                              
  

 

 

    

 

 

   

 

 

    

 

 

 
          

Net current-period other comprehensive (loss) income

             (15,582             (15,582

June 29, 2013

   $  —       $  (19,914   $  10,580       $  (9,334
    

Six Month (26 week) Period Ended

June 29, 2013

 
     Gains and Losses on
Hedging Derivatives
     Foreign Currency
Gain (Loss)
    Adjustment to Early
Retiree Medical Plan
     Total  

December 31, 2012

   $       $ 46,181      $ 10,580       $ 56,761   

Other comprehensive (loss) income before reclassifications

             (66,095             (66,095

Amounts reclassified from accumulated other comprehensive (loss) income into earnings

                              
  

 

 

    

 

 

   

 

 

    

 

 

 

Net current-period other comprehensive (loss) income

             (66,095             (66,095

June 29, 2013

   $       $ (19,914   $ 10,580       $ (9,334

 

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Table of Contents
    

Three Month (13 week) Period Ended

June 30, 2012

 
     Gains and Losses on
Hedging Derivatives
    Foreign Currency
Gain (Loss)
    Adjustment to Early
Retiree Medical Plan
     Total  

April 2, 2012

   $ (31,660   $ 41,770      $  14,384       $      24,494   

Other comprehensive (loss) income before reclassifications

            (55,433             (55,433

Amounts reclassified from accumulated other comprehensive (loss) income into earnings (1)

     10,553                       10,553   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net current-period other comprehensive (loss) income

     10,553        (55,433             (44,880

Other

            35                35   

June 30, 2012

   $ (21,107   $ (13,628   $ 14,384       $ (20,351

1 - Includes $10,553 net-of-tax impact of accumulated other comprehensive income reclassifications into Cost of Products Sold for net losses on commodity contracts. The tax impact of this reclassification was $6,200.

 

    

Six Month (26 week) Period Ended

June 30, 2012

 
     Gains and Losses on
Hedging Derivatives
    Foreign Currency
Gain (Loss)
    Adjustment to Early
Retiree Medical Plan
     Total  

December 31, 2011

   $ (40,250   $ (12,311   $  14,384       $ (38,177

Other comprehensive (loss) income before reclassifications

     (2,264     (1,381             (3,645

Amounts reclassified from accumulated other comprehensive (loss) income into earnings (1)

     21,407                           21,407   
  

 

 

   

 

 

   

 

 

    

 

 

 
         

Net current-period other comprehensive (loss) income

     19,143        (1,381             17,762   

Other

            64                64   

June 30, 2012

   $ (21,107   $ (13,628   $ 14,384       $ (20,351

1 - Includes $21,407 net-of-tax impact of accumulated other comprehensive income reclassifications into Cost of Products Sold for net losses on commodity contracts. The tax impact of this reclassification was $12,600.

 

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18. SEGMENTS: Nucor reports its results in the following segments: steel mills, steel products and raw materials. The steel mills segment includes carbon and alloy steel in sheet, bars, structural and plate; steel trading businesses; rebar distribution businesses; and Nucor’s equity method investments in Duferdofin Nucor and NuMit. The steel products segment includes steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold finished steel, steel fasteners, metal building systems, steel grating and expanded metal, and wire and wire mesh. The raw materials segment includes DJJ, a scrap broker and processor; Nu-Iron Unlimited, a facility that produces DRI used by the steel mills; a DRI facility under construction in Louisiana; our natural gas working interests; and Nucor’s equity method investment in Hunter Ridge. Previously Nucor’s steel trading businesses and rebar distribution businesses were reported in an “All other” category. Beginning in the first quarter of 2013, these businesses were reclassified to the steel mills segment as part of a realignment of Nucor’s reportable segments to better reflect the way in which they are managed. The segment data for the comparable period has also been reclassified into the steel mills segment in order to conform to the current year presentation. The steel mills, steel products and raw materials segments are consistent with the way Nucor manages its business, which is primarily based upon the similarity of the types of products produced and sold by each segment.

Net interest expense, other income, profit sharing expense, stock-based compensation and changes in the LIFO reserve are shown under Corporate/eliminations. Corporate assets primarily include cash and cash equivalents, short-term investments, restricted cash and investments, allowances to eliminate intercompany profit in inventory, fair value of natural gas hedges, deferred income tax assets, federal income taxes receivable, the LIFO reserve and investments in and advances to affiliates.

Nucor’s results by segment were as follows (in thousands):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     June 29, 2013     June 30, 2012     June 29, 2013     June 30, 2012  

Net sales to external customers:

  

     

Steel mills

   $ 3,197,433      $ 3,615,151      $ 6,465,587      $ 7,363,292   

Steel products

     937,104        991,444        1,726,451        1,833,689   

Raw materials

     531,051        497,604        1,024,322        979,812   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 4,665,588      $ 5,104,199      $ 9,216,360      $  10,176,793   
  

 

 

   

 

 

   

 

 

   

 

 

 

Intercompany sales:

  

     

Steel mills

   $ 639,425      $ 706,755      $ 1,272,145      $ 1,327,003   

Steel products

     30,855        18,993        50,127        35,779   

Raw materials

     2,183,495        2,479,148        4,346,983        5,361,379   

Corporate/eliminations

     (2,853,775     (3,204,896     (5,669,255     (6,724,161
  

 

 

   

 

 

   

 

 

   

 

 

 
   $      $      $      $   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes and noncontrolling interests:

        

Steel mills

   $ 237,102      $ 336,508      $ 509,360      $ 726,231   

Steel products

     32,073        9,202        20,149        (23,842

Raw materials

     12,218        15,116        13,754        29,688   

Corporate/eliminations

     (129,061     (144,633     (237,603     (290,822
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 152,332      $ 216,193      $ 305,660      $ 441,255   
  

 

 

   

 

 

   

 

 

   

 

 

 
     June 29, 2013     Dec. 31, 2012              

Segment assets:

  

     

Steel mills

   $ 7,873,086      $ 7,870,692       

Steel products

     2,904,387        2,870,810       

Raw materials

     3,641,280        3,379,742       

Corporate/eliminations

     (652,102     30,815       
  

 

 

   

 

 

     
   $ 13,766,651      $ 14,152,059       
  

 

 

   

 

 

     

 

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19. EARNINGS PER SHARE: The computations of basic and diluted net earnings per share are as follows (in thousands, except per share amounts):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     June 29, 2013     June 30, 2012     June 29, 2013     June 30, 2012  

Basic net earnings per share:

        

Basic net earnings

   $ 85,145      $ 112,299      $ 169,934      $ 257,403   

Earnings allocated to participating securities

     (419     (422     (805     (830
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings available to common stockholders

   $ 84,726      $ 111,877      $ 169,129      $ 256,573   
  

 

 

   

 

 

   

 

 

   

 

 

 

Average shares outstanding

     318,903        317,975        318,796        317,832   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net earnings per share

   $ 0.27      $ 0.35      $ 0.53      $ 0.81   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net earnings per share:

        

Diluted net earnings

   $ 85,145      $ 112,299      $ 169,934      $ 257,403   

Earnings allocated to participating securities

     (419     (422     (805     (830
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings available to common stockholders

   $ 84,726      $ 111,877      $ 169,129      $ 256,573   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted average shares outstanding:

        

Basic shares outstanding

     318,903        317,975        318,796        317,832   

Dilutive effect of stock options and other

     120        65        138        78   
  

 

 

   

 

 

   

 

 

   

 

 

 
     319,023        318,040        318,934        317,910   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net earnings per share

   $ 0.27      $ 0.35      $ 0.53      $ 0.81   
  

 

 

   

 

 

   

 

 

   

 

 

 

The following stock options were excluded from the computation of diluted net earnings per share because their effect would have been anti-dilutive (in thousands, except per share amounts):

 

     Three Months (13 Weeks) Ended      Six Months (26 Weeks) Ended  
     June 29, 2013      June 30, 2012      June 29, 2013      June 30, 2012  

Anti-dilutive stock options:

  

        

Weighted average shares

     546         801         276         401   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average exercise price

   $ 44.51       $ 42.07       $ 44.51       $ 42.07   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20. SUBSEQUENT EVENT: On July 29, 2013, Nucor issued $500.0 million of 4.00% notes due in 2023 and $500.0 million of 5.20% notes due in 2043. Net proceeds of the issuances were $991.5 million. Costs of $8.5 million associated with the issuances have been capitalized and are amortized over the life of the notes.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements made in this quarterly report are forward-looking statements that involve risks and uncertainties. The words “believe,” “expect,” “project,” “will,” “should,” “could” and similar expressions are intended to identify those forward-looking statements. These forward-looking statements reflect the Company’s best judgment based on current information, and although we base these statements on circumstances that we believe to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information. As such, the forward-looking statements are not guarantees of future performance, and actual results may vary materially from the projected results and expectations discussed in this report. Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: (1) the sensitivity of the results of our operations to prevailing steel prices and changes in the supply and cost of raw materials, including pig iron, iron ore and scrap steel; (2) availability and cost of electricity and natural gas which could negatively affect our cost of steel production or could result in a delay or cancellation of existing or future drilling within our natural gas working interest drilling programs; (3) market demand for steel products, which, in the case of many of our products, is driven by the level of nonresidential construction activity in the U.S.; (4) competitive pressure on sales and pricing, including pressure from imports and substitute materials; (5) impairment in the recorded value of inventory, equity investments, fixed assets, goodwill or other long-lived assets; (6) uncertainties surrounding the global economy, including the severe economic downturn in construction markets and excess world capacity for steel production; (7) fluctuations in currency conversion rates; (8) U.S. and foreign trade policy affecting steel imports or exports; (9) significant changes in laws or government regulations affecting environmental compliance, including legislation or regulations that result in greater regulation of greenhouse gas emissions that could increase our energy costs and our capital expenditures and operating costs or cause one or more of our permits to be revoked or make it more difficult to obtain permit modifications; (10) the cyclical nature of the steel industry; (11) capital investments and acquisitions and their impact on our performance; and (12) our safety performance.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements included elsewhere in this report, as well as the audited consolidated financial statements, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2012.

Overview

Nucor and its affiliates manufacture steel and steel products. Nucor also produces direct reduced iron (“DRI”) for use in its steel mills. Through The David J. Joseph Company and its affiliates (“DJJ”), the Company also processes ferrous and nonferrous metals and brokers ferrous and nonferrous metals, pig iron, hot briquetted iron (“HBI”) and DRI. Most of Nucor’s operating facilities and customers are located in North America, but increasingly, Nucor is doing business outside of North America as well. Nucor’s operations include several international trading and sales companies that buy and sell steel and steel products manufactured by the Company and others. Nucor is North America’s largest recycler, using scrap steel as the primary raw material in producing steel and steel products.

Nucor reports its results in three segments: steel mills, steel products and raw materials. In the steel mills segment, Nucor produces sheet steel (hot and cold-rolled), plate steel, structural steel (wide-flange beams, beam blanks, H-piling and sheet piling) and bar steel (blooms, billets, concrete reinforcing bar, merchant bar and special bar quality). Nucor manufactures steel principally from scrap steel and scrap steel substitutes using electric arc furnaces, continuous casting and automated rolling mills. The steel mills segment also includes Nucor’s equity method investments in Duferdofin Nucor and NuMit LLC, as well as Nucor’s steel trading businesses and rebar distribution businesses that were moved into the segment in the first quarter of 2013. In the steel products segment, Nucor produces steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold-finished steel, steel fasteners, metal building systems, steel grating and expanded metal, and wire and wire mesh. In the raw materials segment, Nucor produces DRI; brokers ferrous and nonferrous metals, pig iron, HBI and DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap metal. The raw materials segment also includes certain equity method investments and our natural gas drilling working interests.

In late June 2012, Nucor completed the acquisition of the entire equity interest in Skyline Steel LLC (“Skyline”) and its subsidiaries for the cash purchase price of approximately $675.4 million. It is a steel foundation manufacturer and distributor serving the U.S., Canada, Mexico and Caribbean. Skyline’s steel products are used in marine construction, bridge and highway construction, heavy civil construction, storm protection, underground commercial parking, and environmental containment projects in the infrastructure and construction industries. Skyline is a significant consumer of H-piling and sheet piling from Nucor-Yamato Steel Company, and is a growing downstream consumer of Nucor’s coiled plate and sheet products. Skyline’s results since the acquisition date are included in the steel mills segment’s results.

 

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In August 2012, Nucor sold the assets of Nucor Wire Products Pennsylvania, Inc. Nucor continues to produce wire and mesh products at facilities in Utah, Connecticut and our Laurel LEC Operations in Canada.

In October 2012, a subsidiary of Nucor entered into a long-term agreement with Encana Oil & Gas (USA) Inc. (Encana) under which Nucor acquired an undivided 50% working interest in U.S.-based proven natural gas reserves. Nucor expects to invest approximately $3.64 billion for the drilling and completion of natural gas wells over the life of the agreement that is projected to span more than 20 years. Natural gas produced by our working interest drilling programs is sold to offset exposure to the volatility of the price of natural gas we use in our steel production and DRI facilities.

Nucor acquired a 50% economic and voting interest in Hunter Ridge in November 2012. Hunter Ridge provides services for the gathering, separation and compression of energy products including natural gas produced by Nucor’s working interest drilling program. As of June 29, 2013, Nucor’s investment in Hunter Ridge was $130.6 million.

Construction is nearing completion on our 2,500,000-ton DRI facility in Louisiana. Due to extreme weather conditions in the first quarter, we now expect to start-up late in the third quarter of 2013.

The average utilization rates of all operating facilities in the steel mills, steel products and raw materials segments were approximately 73%, 56% and 61%, respectively, in the first half of 2013 compared with 77%, 59% and 67%, respectively, in the first half of 2012. The decrease in the average utilization rate for the steel mills segment in the first half of 2013 as compared to the first half of 2012 is primarily due to overcapacity in the sheet steel markets and the negative impact of imports on our business.

Results of Operations

Net Sales Net sales to external customers by segment for the second quarter and first six months of 2013 and 2012 were as follows (in thousands):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     June 29, 2013      June 30, 2012      % Change     June 29, 2013      June 30, 2012      % Change  

Steel mills

   $ 3,197,433       $ 3,615,151         -12   $ 6,465,587       $ 7,363,292         -12

Steel products

     937,104         991,444         -5     1,726,451         1,833,689         -6

Raw materials

     531,051         497,604         7     1,024,322         979,812         5
  

 

 

    

 

 

      

 

 

    

 

 

    

Net sales

   $ 4,665,588       $ 5,104,199         -9   $ 9,216,360       $ 10,176,793         -9
  

 

 

    

 

 

      

 

 

    

 

 

    

 

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Net sales for the second quarter of 2013 decreased 9% from the second quarter of 2012. Average sales price per ton decreased 7% from $861 in the second quarter of 2012 to $799 in the second quarter of 2013, while total tons shipped to outside customers decreased 1% from the same period last year.

Net sales for the first six months of 2013 decreased 9% from the first six months of 2012. Average sales price per ton decreased 7% from $859 in the first half of 2012 to $798 in the first half of 2013, while total tons shipped to outside customers decreased 3% from last year.

In the steel mills segment, production and sales tons were as follows (in thousands):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     June 29, 2013      June 30, 2012      % Change     June 29, 2013      June 30, 2012      % Change  

Steel production

     4,892         5,061         -3     9,710         10,320         -6
  

 

 

    

 

 

      

 

 

    

 

 

    

Outside steel shipments

     4,274         4,449         -4     8,608         9,039         -5

Inside steel shipments

     751         753         -        1,492         1,398         7
  

 

 

    

 

 

      

 

 

    

 

 

    

Total steel shipments

     5,025         5,202         -3     10,100         10,437         -3
  

 

 

    

 

 

      

 

 

    

 

 

    

Net sales for the steel mills segment decreased 12% from the second quarter of 2012 due to an 8% decrease in the average sales price per ton from $812 to $746, and a 4% decrease in tons sold to outside customers. The most significant decreases in average selling prices were for our sheet, bar and plate products, which were impacted by imports and excess domestic capacity. Average selling prices for our structural products group increased from the second quarter and the first half of 2012 because Skyline’s distribution business is included for the entire year in 2013. Skyline, which was acquired on June 20, 2012, was only included in Nucor’s results for 10 days in the second quarter and first half of 2012. Skyline has higher average sales prices for its products because of the value-added functions it provides to its customers. Demand in nonresidential construction markets is slowly improving but continues to lack sustained momentum. The strongest markets continue to be in manufactured goods, including energy and automotive.

The 12% decrease in sales from the first half of 2012 to the first half of 2013 in the steel mills segment was attributable to the 5% decrease in tons sold to outside customers and the 8% decrease in average sales price per ton from $818 in the first half of 2012 to $751 in the first half of 2013.

Tonnage data for the steel products segment is as follows (in thousands):

 

     Three Months (13 weeks) Ended     Six Months (26 weeks) Ended  
     June 29, 2013      June 30, 2012      % Change     June 29, 2013      June 30, 2012      % Change  

Joist production

     91         75         21     162         139         17

Deck sales

     83         76         9     152         141         8

Cold finish sales

     124         132         -6     246         270         -9

Fabricated concrete reinforcing steel sales

     280         322         -13     508         572         -11

The 5% decrease in the steel products segment’s sales from the second quarter of 2012 was due to a slight decrease in sales price per ton from $1,419 to $1,417 and a 4% decrease in volume. The 6% decrease in the steel products segment’s sales for the first half of the year was due to a slight decrease in average sales price per ton from $1,416 to $1,414 and a 5% decrease in volume. Sales in the steel products segment remain depressed due to the continued weakness in the nonresidential construction market. Sales of fabricated concrete reinforcing steel decreased in the second quarter of 2013 as compared to the second quarter of 2012 due largely to poor weather conditions in the markets we serve.

 

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The sales for the raw materials segment increased 7% from the second quarter of 2012 and 5% from the first half of 2012 primarily due to increased volumes at DJJ’s recycling and brokerage businesses and at our natural gas drilling working interests. Increased volumes at DJJ were partially offset by lower pricing. In the second quarter of 2013, approximately 83% of outside sales in the raw materials segment were from the brokerage operations of DJJ and approximately 14% of the outside sales were from the scrap processing facilities (87% and 11%, respectively, in the second quarter of 2012). In the first half of 2013, approximately 84% of outside sales for the raw materials segment were from the brokerage operations and approximately 13% of outside sales were from the scrap processing facilities of DJJ (85% and 14%, respectively, in the first half of 2012).

Gross Margins For the second quarter of 2013, Nucor recorded gross margins of $313.1 million (7%), compared to $399.9 million (8%) in the second quarter of 2012. The gross margin was impacted by a 7% decrease in average sales price per ton along with the following factors:

 

   

In the steel mills segment, the average scrap and scrap substitute cost per ton used decreased 12% from $427 in the second quarter of 2012 to $377 in the second quarter of 2013; however, metal margin dollars also decreased from the second quarter of 2012. Metal margins were also lower in the second quarter of 2013 as compared to the first quarter of 2013. Metal margin is the difference between the selling price of steel and the cost of scrap and scrap substitutes.

Scrap prices are driven by the global supply and demand for scrap and other iron based raw materials used to make steel. Scrap prices experienced a downward trend throughout the second quarter of 2013. As we begin the third quarter, we have seen scrap prices increase from the bottoming that occurred in the second quarter. We currently expect increased scrap prices in the third quarter as compared to the second quarter, along with higher selling prices and gross margins.

 

   

Nucor’s gross margins are significantly impacted by the application of the LIFO method of accounting. LIFO charges or credits for interim periods are based on management’s current estimates of both inventory costs and quantities at year-end. The actual amounts will likely differ from these estimated amounts, and such differences may be significant. Annual charges or credits are largely based on the relative changes in cost and quantities year over year, primarily within raw material inventory in the steel mills segment. Gross margin was impacted by a LIFO credit of $14.5 million in the second quarter of 2012. No LIFO charge or credit was recorded in the second quarter of 2013.

 

   

Nucor’s gross margins were negatively impacted in the second quarter of 2012 by $8.5 million in purchase accounting adjustments and the elimination of profit associated with our steel mills’ sales to Skyline post-acquisition.

 

   

Energy costs increased approximately $1 per ton from the second quarter of 2012 due mainly to increased electricity unit costs due to lower production volumes.

 

   

Our rebar fabrication businesses experienced improvements in gross margins in the second quarter of 2013 as compared to the second quarter of 2012 due to higher sales prices and management initiatives that have resulted in lower costs, better selling strategies and improved supplier relationships.

For the first half of 2013, Nucor recorded gross margins of $616.3 million (7%), compared to $780.5 million (8%) in the first half of 2012. The gross margin was impacted by a 7% decrease in average sales price per ton and a 3% decrease in shipments to external customers in the first six months of 2013 as compared to the first six months of 2012. Gross margins were also impacted by the following factors:

 

   

In the steel mills segment, the average scrap and scrap substitute cost per ton used decreased 13% from $436 in the first half of 2012 to $378 in the first half of 2013; however, metal margins also decreased.

 

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Nucor’s gross margins were negatively impacted in the first six months of 2012 by the $8.5 million of charges related to the June 2012 Skyline acquisition.

 

   

Gross margin was negatively affected by a LIFO charge of $18.0 million in the first half of 2013. No LIFO charge was recorded in the first half of 2012.

 

   

Gross margins related to DJJ’s scrap processing operations decreased significantly during the first half of 2013 compared to the first half of 2012 due to the continued difficult conditions in the scrap processing industry. Gross margins at DJJ’s scrap processing facilities were also impacted by weather-related effects in the first quarter of 2013 that reduced the flow of scrap into our scrap processing operations.

 

   

Energy costs increased approximately $1 per ton from the first six months of 2012 due mainly to increased electricity unit costs due to lower production volumes.

 

   

Our rebar fabrication businesses experienced improvements in gross margins in the first six months of 2013 as compared to the first six months of 2012 due to the reasons described above.

Marketing, Administrative and Other Expenses The major component of marketing, administrative and other expenses is profit sharing and other incentive compensation costs. These costs, which are based upon and fluctuate with Nucor’s financial performance, decreased $5.6 million in the second quarter of 2013 compared to the second quarter of 2012, and decreased $16.5 million in the first half of 2013 compared to the first half of 2012 due to the decreased profitability of the Company. Profit sharing and other incentive compensation costs increased $13.4 million in the second quarter of 2013 compared to the first quarter of 2013 due to the annual restricted stock unit grant and the stock option grant that occurred in the second quarter of 2013.

Equity in (Earnings) Losses of Unconsolidated Affiliates Equity method investment earnings, including amortization expense and other purchase accounting adjustments, were $1.6 million and a loss of $0.2 million in the second quarter of 2013 and 2012, respectively, and were earnings of $0.4 million and a loss of $6.8 million in the first half of 2013 and 2012, respectively. The increase in the equity method investment earnings is primarily due to a decrease in losses at Duferdofin Nucor S.r.l, and higher equity method earnings at NuMit LLC during the first six months of 2013.

Impairment of Non-current Assets Nucor incurred a $30.0 million impairment charge in the second quarter of 2012 (none in the second quarter and first half of 2013). The entire 2012 charge related to the impairment of Nucor’s investment in Duferdofin Nucor.

In the fourth quarter of 2012, Nucor assessed its equity investment in Duferdofin Nucor for impairment. After completing its assessment, the Company determined that the estimated fair value exceeded its carrying amount and that there was no need for impairment. Steel market conditions in Europe have continued to be challenging through the first six months of 2013, and, therefore, it is reasonably possible that based on actual performance in the near term the estimates used in our fourth quarter valuation could change and result in further impairment of our investment that could have a material effect on our results.

 

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Interest Expense (Income) Net interest expense for the second quarter and first half of 2013 and 2012 was as follows (in thousands):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     June 29, 2013     June 30, 2012     June 29, 2013     June 30, 2012  

Interest expense

   $ 40,676      $ 44,318      $ 74,356      $ 89,300   

Interest income

     (1,448     (3,267     (2,637     (6,577
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense, net

   $ 39,228      $ 41,051      $ 71,719      $ 82,723   
  

 

 

   

 

 

   

 

 

   

 

 

 

In the second quarter of 2013, gross interest expense decreased 8% from the second quarter of 2012 due to a 16% decrease in average debt outstanding partially offset by lower capitalized interest. Gross interest income decreased 56% due mainly to decreases in average investments outstanding.

In the first half of 2013, gross interest expense decreased 17% from the first half of 2012 due to a 15% decrease in average debt outstanding and slightly lower interest rates. Gross interest income decreased 60% due mainly to decreases in average investments outstanding.

Earnings Before Income Taxes and Noncontrolling Interests Earnings before income taxes and noncontrolling interests by segment for the second quarter and first half of 2013 and 2012 were as follows (in thousands):

 

     Three Months (13 Weeks) Ended     Six Months (26 Weeks) Ended  
     June 29, 2013     June 30, 2012     June 29, 2013     June 30, 2012  

Steel mills

   $ 237,102      $ 336,508      $ 509,360      $ 726,231   

Steel products

     32,073        9,202        20,149        (23,842

Raw materials

     12,218        15,116        13,754        29,688   

Corporate/eliminations

     (129,061     (144,633     (237,603     (290,822
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 152,332      $ 216,193      $ 305,660      $ 441,255   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes and noncontrolling interests in the steel mills segment for the second quarter and first six months of 2013 decreased significantly from the second quarter and first six months of 2012 due to lower volume, lower sales prices, lower metal margins, and increased per unit energy costs caused by decreased production volume. Partially offsetting these factors was decreased profit sharing and other incentive compensation costs and the absence of an impairment charge in 2013 ($30.0 million was recorded in the second quarter of 2012 related to the impairment of Duferdofin Nucor). Our second quarter of 2013 operating performance in the steel mills segment was down compared with first quarter of 2013 performance due mainly to weakness in sheet steel. Imports and excess domestic capacity continue to negatively impact the steel mills segment’s performance. Though conditions are slowly improving from historically low levels, the nonresidential construction market continues to lack sustained momentum. The strongest end markets continue to be in manufactured goods, including energy and automotive.

In the steel products segment, earnings before income taxes and noncontrolling interests increased from the second quarter and first half of 2012, as well as from the first quarter of 2013. Second quarter downstream steel products shipments to outside customers decreased 4% from the second quarter of 2012 and increased 19% over the first quarter of 2013. In spite of lower volumes in 2013 as compared to 2012, due primarily to weather conditions, our rebar fabrication businesses experienced increased profitability in the second quarter and first six months of 2013 as compared to the second quarter and first six months of 2012. The increased profitability at our rebar fabrication businesses is due to higher average sales prices and management initiatives that have resulted in lower costs, better selling strategies and improved supplier relationships. Our joist, decking and cold finish operations also experienced increased profitability as compared to the second quarter and first six months of 2012, as well as the first quarter of 2013.

 

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The decrease in the profitability of our raw materials segment for the first six months of 2013 as compared to the first six months of 2012 is primarily due to the difficult conditions in the scrap processing industry. The challenging conditions began in the first quarter of 2012, worsened throughout the remainder of 2012 and continued into the first six months of 2013. During this time, excess shredding capacity has increased competition for raw materials while the selling price of scrap has decreased. We believe that scrap prices bottomed during the second quarter of 2013. An unplanned 18 day outage at our Trinidad DRI facility in the first quarter of 2013 also contributed to lower profitability for the raw materials segment in the first six months of 2013 as compared to the first six months of 2012. Earnings before income taxes and noncontrolling interests increased in the second quarter of 2013 as compared to the first quarter of 2013 primarily due to the fact that the Trinidad DRI facility operated on a normal schedule without any unplanned outages.

Noncontrolling Interests Noncontrolling interests represent the income attributable to the noncontrolling partners of Nucor’s joint ventures, primarily Nucor-Yamato Steel Company (“NYS”), of which Nucor owns 51%. The decrease in earnings attributable to noncontrolling interests in the second quarter of 2013 as compared to the second quarter of 2012 was primarily attributable to decreased sales volumes at NYS during the quarter. Sales volumes were down as a result of a 17 day shutdown during the second quarter of 2013 in preparation for a capital project to expand NYS’ production of hot rolled sheet piling. The increase in earnings attributable to noncontrolling interests in the first half of 2013 over the first half of 2012 is the result of improved margins, partially offset by decreased sales volumes. Under the NYS limited partnership agreement, the minimum amount of cash to be distributed each year to the partners is the amount needed by each partner to pay applicable U.S. federal and state income taxes. In the first six months of 2013 and 2012, the amount of cash distributed to noncontrolling interest holders exceeded the earnings attributable to noncontrolling interests based on mutual agreement of the general partners; however, the cumulative amount of cash distributed to partners was less than the cumulative net earnings of the partnership.

Provision for Income Taxes Nucor had an effective tax rate of 30.2% in the second quarter of 2013 compared with 35.4% in the second quarter of 2012. The expected rate for the full year of 2013 will be approximately 31.0% compared with 30.5% for the full year of 2012. The decrease in the effective tax rate for the second quarter of 2013 as compared to the second quarter of 2012 is due to the tax impact of the Duferdofin Nucor impairment charge being fully recorded in the second quarter of 2012.

We estimate that in the next twelve months our gross uncertain tax positions, exclusive of interest, could decrease by as much as $18.6 million as a result of the expiration of the statute of limitations.

Nucor has concluded U.S. federal income tax matters for years through 2008. The years 2004, 2007, and 2008 are open to the extent net operating losses were carried back. The 2009 to 2012 tax years are open to examination by the Internal Revenue Service. In 2011 the Canada Revenue Agency completed an audit examination for the periods 2006 to 2008 for Harris Steel Group Inc. and subsidiaries with immaterial adjustments to the income tax returns. The tax years 2009 through 2012 remain open to examination by other major taxing jurisdictions to which Nucor is subject (primarily Canada and other state and local jurisdictions).

Net Earnings Attributable to Nucor Stockholders and Return on Equity Nucor reported consolidated net earnings of $85.1 million, or $0.27 per diluted share, in the second quarter of 2013 compared to consolidated net earnings of $112.3 million, or $0.35 per diluted share, in the second quarter of 2012. Net earnings attributable to Nucor stockholders as a percentage of net sales were 2% in both the second quarter of 2013 and 2012.

Nucor reported consolidated net earnings of $169.9 million, or $0.53 per diluted share, in the first half of 2013, compared to consolidated net earnings of $257.4 million, or $0.81 per diluted share, in the first half of 2012. Net earnings attributable to Nucor stockholders as a percentage of net sales were 2% and 3% in the first half of 2013 and 2012, respectively. Return on average stockholders’ equity was approximately 4% and 7% in the first half of 2013 and 2012, respectively.

 

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Outlook We currently expect to see a modest improvement in earnings for the third quarter of 2013. We expect to see improvements in sheet steel pricing, which dropped to its lowest level since November 2010 in June but has since begun to slowly rebound. Margins on sheet steel have followed a similar trend and are slowly recovering from lows in the second quarter. The automotive and energy markets remain strong, while the construction market remains challenged. We also expect to see increased earnings from our downstream businesses in the third quarter, continuing the upward trend observed in the second quarter. Our David J. Joseph operations are expected to benefit from the bottoming of scrap pricing that occurred in the second quarter.

Nucor’s largest exposure to market risk is via our steel mills and steel products segments. Our largest single customer in the first half of 2013 represented approximately 5% of sales and consistently pays within terms. In the raw materials segment, we are exposed to price fluctuations related to the purchase of scrap steel and iron ore. Our exposure to market risk is mitigated by the fact that our steel mills use a significant portion of the products of this segment.

Liquidity and capital resources

Cash provided by operating activities was $485.0 million in the first half of 2013, an increase of 9% compared with cash provided by operating activities of $446.5 million in the first half of 2012. Changes in operating assets and liabilities were ($81.6) million in the first half of 2013 compared with ($201.6) million in the first half of 2012. Driving this increase was the net change in inventories, accounts payable, and salaries, wages and related accruals. There was a significant increase in cash used to purchase inventory during the first half of 2012 because inventory tons on hand increased approximately 16% from year-end 2011 to the end of the second quarter of 2012. Cash used to purchase inventories decreased from year-end 2012 to the end of the second quarter of 2013 because inventory tons on hand decreased slightly and scrap cost per ton in ending inventory decreased. The increase in inventories in the first half of 2012 led to an increase in accounts payable during the period, and the decrease in inventories in the first half of 2013 led to a decrease in accounts payable during the first half of 2013. Also increasing cash provided by operating activities was a $47.7 million net change in salaries, wages and related accruals. Cash used to satisfy salaries, wages and related accruals was less from year-end 2012 to the second quarter of 2013 than from year-end 2011 to the second quarter of 2012 due mainly to a smaller payout of profit sharing and other incentive compensation in the first quarter of 2013 than was paid out in the first quarter of 2012. Partially offsetting the increases in cash from changes in operating assets and liabilities was the $86.0 million decrease in net earnings from the first half of 2012 to the first half of 2013. The $86.0 million change includes a $30.0 million non-cash impairment charge for the impairment of non-current assets during the first half of 2012.

The current ratio was 3.0 at the end of the second quarter of 2013 and 2.8 at year-end 2012. Accounts receivable and inventories increased 4% and decreased 2%, respectively, since year-end, while sales increased by 5% from year-end 2012. In the second quarter of 2013, total accounts receivable turned approximately every five weeks and inventories turned approximately every seven weeks. This compares to turns every five weeks for accounts receivable and every six weeks for inventory in the second quarter of 2012. Inventory turnover has worsened slightly from historical rates due mainly to the acquisition of Skyline, which as a distributor must keep a larger supply of inventory on hand. The current ratio was also impacted by a 54% decrease in short-term investments and a 40% decrease in cash and cash equivalents. The decrease in cash and cash equivalents and short-term investments is primarily attributable to their use in the repayment of a $250.0 million note in June 2013, the spending for capital projects and the payment of dividends. The ratio was also impacted by a 14% decrease in salaries, wages and related accruals from year-end 2012 due to the payout of profit sharing and other incentive compensation accruals during the first quarter of 2013.

 

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Cash used in investing activities increased $99.4 million over the prior year period. Capital expenditures increased $237.9 million in large part due to the construction of our DRI facility in Louisiana and the funding of our natural gas working interest drilling program. This increase in capital expenditures was accompanied by a decrease in proceeds from the sale of investments and restricted investments of $1.1 billion. Partially offsetting those changes was a $390.0 million decrease in purchases of investments and a decrease in cash used for acquisitions of $746.4 million. While Nucor had no acquisitions in the first half of 2013, our DJJ team acquired three metal recycling companies in the first quarter of 2012, and Nucor closed on the Skyline acquisition for $683.5 million in the second quarter of 2012.

Cash used in financing activities increased from $269.6 million in the first half of 2012 to $538.9 million in the first half of 2013 due primarily to the repayment of $250.0 million of long-term debt.

Nucor’s conservative financial practices have served us well in the past and are serving us well today. Our cash and cash equivalents and short-term investments position remains solid at $678.1 million as of June 29, 2013, and an additional $71.1 million of restricted cash and investments is available for use in the construction of the DRI facility in Louisiana. Our $1.5 billion revolving credit facility is undrawn and does not expire until December 2016, and 99% of our long-term debt matures in 2017 and beyond. We believe our financial strength is a key strategic advantage among domestic steel producers, particularly during recessionary business cycles. Aside from one mining company that shares the same Moody’s rating as Nucor, we carry the highest credit ratings of any metals and mining company in North America, with an A rating from Standard and Poor’s and a Baa1 rating from Moody’s. Our credit ratings are dependent upon a number of factors, both qualitative and quantitative, and are subject to change at any time. The disclosure of our credit ratings is made in order to enhance investors’ understanding of our sources of liquidity and the impact of our credit ratings on our cost of funds.

We continue to have adequate access to the capital markets at a reasonable cost of funds for liquidity purposes when needed. This was evidenced when, subsequent to the end of the second quarter of 2013, we issued $500.0 million of ten year notes at an interest rate of 4.00% and $500.0 million of 30 year notes at an interest rate of 5.20%. Nucor’s cash provided by operating activities less cash used in capital expenditures for the first half of 2013 was a net cash outflow. Our spending levels in 2012 and 2013 were marked by several significant transactions. The combined $1.57 billion of capital expenditures in 2012 and the first half of 2013, and the previously mentioned acquisition of Skyline in 2012 were significant uses of cash that were largely discretionary spending made in order to increase our long-term earnings power. In addition, since the beginning of 2012, we have retired $900.0 million in long-term debt that was at weighted average interest rates that were higher than the weighted average interest rates on the newly issued $1.00 billion notes. We believe the above issuance of notes at favorable market terms was in the best interest of our stockholders in order to continue to provide us with ample liquidity to execute our business plan for the foreseeable future.

Our credit facility includes only one financial covenant, which is a limit of 60% on the ratio of funded debt to total capitalization. In addition, the credit facility contains customary non-financial covenants, including a limit on Nucor’s ability to pledge the Company’s assets and a limit on consolidations, mergers and sales of assets. As of June 29, 2013, our funded debt to total capital ratio was 31%, and we were in compliance with all other covenants under our credit facility. No borrowings were outstanding under the credit facility as of June 29, 2013.

In challenging market conditions such as we are experiencing today, our financial strength allows a number of capital preservation options. Nucor’s robust capital investment and maintenance practices give us the flexibility to reduce spending by prioritizing our long list of capital projects, potentially rescheduling certain projects, and selectively allocating capital to investments with the greatest impact on our long-term earnings power. Capital expenditures increased 62% from $383.4 million during the first half of 2012 to $621.3 million in the first half of 2013. Capital expenditures for 2013 are projected to be approximately $1.1 billion compared to $947.6 million in 2012.

In June 2013, Nucor’s board of directors declared a quarterly cash dividend on Nucor’s common stock of $0.3675 per share payable on August 9, 2013 to stockholders of record on June 28, 2013. This dividend is Nucor’s 161st consecutive quarterly cash dividend.

Funds provided from operations, cash and cash equivalents, short-term investments, restricted cash, new borrowings under the existing credit facilities and the above described subsequently issued notes are expected to be adequate to meet future capital expenditure and working capital requirements for existing operations for at least the next 24 months.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of business, Nucor is exposed to a variety of market risks. We continually monitor these risks and develop appropriate strategies to manage them.

Interest Rate Risk - Nucor manages interest rate risk by using a combination of variable-rate and fixed-rate debt. Nucor also occasionally makes use of interest rate swaps to manage net exposure to interest rate changes. Management does not believe that Nucor’s exposure to interest rate market risk has significantly changed since December 31, 2012.

Commodity Price Risk—In the ordinary course of business, Nucor is exposed to market risk for price fluctuations of raw materials and energy, principally scrap steel, other ferrous and nonferrous metals, alloys and natural gas. We attempt to negotiate the best prices for our raw materials and energy requirements and to obtain prices for our steel products that match market price movements in response to supply and demand. Nucor utilizes a raw material surcharge as a component of pricing steel to pass through the cost increases of scrap steel and other raw materials. In periods of stable demand for our products, our surcharge mechanism has worked effectively to reduce the normal time lag in passing through higher raw material costs so that we can maintain our gross margins. When demand for and cost of raw materials is lower, however, the surcharge benefits our sales prices to a lesser extent.

Natural gas produced by Nucor’s working interest drilling program is being sold to third parties to offset our exposure to changes in the price of gas consumed by its Louisiana DRI facility. In addition to its future natural gas needs at the new DRI facility scheduled to begin operations later this year, Nucor is also a substantial consumer of natural gas at its steel mill operations. We expect that the natural gas produced through the drilling program will be sufficient to cover Nucor’s demand at all of its steel mills in the United States plus the demand of two DRI plants or, alternatively, at three DRI plants. However, the natural gas production from the working interest drilling program currently does not completely cover the natural gas usage at our operating facilities. For the six months ended June 29, 2013, the volume of natural gas sold from our natural gas working interest drilling program was equal to 56% of the volume of natural gas purchased for consumption in our domestic steel making and DRI facilities.

Our natural gas working interest drilling program is affected by changes in natural gas prices in an inverse manner to natural gas costs at our DRI and steel mill operations. As natural gas prices increase, our increased energy costs at our DRI and steel mill operations is somewhat mitigated by increased profit from sales of natural gas to third party customers from our natural gas drilling program. Likewise, as natural gas prices decrease, we experience decreased energy costs at our DRI and steel mill operations, but we also experience decreased profit from our natural gas drilling program.

The impact of low natural gas prices associated with our drilling program is limited by the existence of a drilling suspension clause. Nucor is contractually obligated to drill a minimum number of wells per year under the terms of our agreements with Encana; however, we have the right to suspend drilling of new wells at any time after January 1, 2015, if market pricing falls below a pre-established threshold.

Nucor also periodically uses derivative financial instruments to hedge a portion of our exposure to price risk related to natural gas purchases used in the production process and to hedge a portion of our scrap, aluminum and copper purchases and sales. Gains and losses from derivatives designated as hedges are deferred in accumulated other comprehensive income (loss) on the condensed consolidated balance sheets and recognized into earnings in the same period as the underlying physical transaction. At June 29, 2013, there were no amounts in accumulated other comprehensive income (loss) related to derivative instruments as all of our previously held positions have settled. Changes in the fair values of derivatives not designated as hedges are recognized in earnings each period. The following table presents the negative effect on pre-tax earnings of a hypothetical change in the fair value of derivative instruments outstanding at June 29, 2013, due to an assumed 10% and 25% change in the market price of each of the indicated commodities (in thousands):

 

Commodity Derivative

   10% Change      25% Change  

Aluminum

   $ 1,348       $ 3,371   

Copper

   $ 483       $ 1,207   

 

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Any resulting changes in fair value would be recognized in net earnings. These hypothetical losses would be partially offset by the benefit of lower prices paid or higher prices received for the physical commodities.

Foreign Currency Risk - Nucor is exposed to foreign currency risk through its operations in Canada, Europe, Trinidad and Colombia. We periodically use derivative contracts to mitigate the risk of currency fluctuations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures – As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the evaluation date.

Changes in Internal Control Over Financial Reporting – There were no changes in our internal control over financial reporting during the quarter ended June 29, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to all such lawsuits, claims and proceedings, we record reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our results of operations, financial position or cash flows.

Item 1A. Risk Factors

There have been no material changes in Nucor’s risk factors from those included in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2012.

Item 6. Exhibits

 

Exhibit

No.

  

Description of Exhibit

10    Senior Officers Annual Incentive Plan, As Amended and Restated Effective January 1, 2013 (incorporated by reference to Appendix A of our Definitive Proxy Statement on Schedule 14A Filed on March 27, 2013) (#)
  10.1    Senior Officers Long-Term Incentive Plan, As Amended and Restated Effective January 1, 2013 (incorporated by reference to Appendix B of our Definitive Proxy Statement on Schedule 14A Filed on March 27, 2013) (#)
  10.2    Employment Agreement of Raymond S. Napolitan, Jr. (#)
  10.3    Consulting Services Agreement with The Corporate Development Institute, Inc. and James D. Hlavacek
12    Computation of Ratio of Earnings to Fixed Charges
31    Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.1    Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  32.1    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101    Financial statements from the quarterly report on Form 10-Q of Nucor Corporation for the quarter ended June 29, 2013, filed on August 7, 2013, formatted in XBRL: (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.

 

(#) Indicates a management contract or compensatory plan or arrangement.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Nucor Corporation has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

NUCOR CORPORATION
By:   /s/ James D. Frias
  James D. Frias
  Chief Financial Officer, Treasurer
  and Executive Vice President

Dated: August 7, 2013

 

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NUCOR CORPORATION

List of Exhibits to Form 10-Q – June 29, 2013

 

Exhibit
No.

  

Description of Exhibit

10    Senior Officers Annual Incentive Plan, As Amended and Restated Effective January 1, 2013 (incorporated by reference to Appendix A of our Definitive Proxy Statement on Schedule 14A Filed on March 27, 2013) (#)
  10.1    Senior Officers Long-Term Incentive Plan, As Amended and Restated Effective January 1, 2013 (incorporated by reference to Appendix B of our Definitive Proxy Statement on Schedule 14A Filed on March 27, 2013) (#)
  10.2    Employment Agreement of Raymond S. Napolitan, Jr. (#)
  10.3    Consulting Services Agreement with The Corporate Development Institute, Inc. and James D. Hlavacek
12    Computation of Ratio of Earnings to Fixed Charges
31    Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.1    Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  32.1    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101    Financial statements (unaudited) from the quarterly report on Form 10-Q of Nucor Corporation for the quarter ended June 29, 2013, filed on August 7, 2013, formatted in XBRL: (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.

 

(#) Indicates a management contract or compensatory plan or arrangement.

 

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EX-10.2

Exhibit 10.2

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement” is made and entered into between NUCOR CORPORATION, a Delaware corporation with its principal place of business in Charlotte, North Carolina, on behalf of itself and each of its affiliates and subsidiaries (all such entities, collectively, “Nucor”), and RAYMOND S. NAPOLITAN (“Executive”), a resident of North Carolina.

WHEREAS, Executive has heretofore been employed at Nucor Corporation’s corporate headquarters in Charlotte, North Carolina as an at-will employee of Nucor in the position of Vice President of Nucor Corporation and President of Nucor Corporation’s Vulcraft/Verco Group (the “Prior Position”); and

WHEREAS, Nucor has offered Executive a promotion to the position of Executive Vice President of Fabricated Construction Products effective June 4, 2013, contingent upon Executive’s execution of this Agreement, and Executive has accepted the promotion; and

WHEREAS, Nucor Corporation’s Board of Directors (the “Board”) has approved Executive’s promotion to the position of Executive Vice President of Fabricated Construction Products contingent upon Executive’s execution of this Agreement; and

WHEREAS, prior to the effective date of the promotion, Executive and Nucor discussed the requirements of the restrictive covenants contained in this Agreement as a condition to Executive’s promotion; and

WHEREAS, Nucor’s promotion of Executive entitles Executive to receive increased compensation and benefits that Executive did not have prior to his promotion; and

WHEREAS, Executive agrees and acknowledges that in his new position of Executive Vice President of Fabricated Construction Products he will acquire greater access to and knowledge of Nucor’s trade secrets and confidential information which Executive did not have prior to his promotion; and

WHEREAS, the parties wish to formalize their employment relationship in writing and for Nucor to employ Executive under the terms and conditions set forth below; and

NOW, THEREFORE, in consideration for the promises and mutual agreements contained herein, the parties agree, effective as of June 4, 2013, as follows:

1. Employment. Nucor agrees to employ Executive in the position of Executive Vice President of Fabricated Construction Products, and Executive agrees to accept employment in this position, subject to the terms and conditions set forth in this Agreement, including the confidentiality, non-competition and non-solicitation provisions which Executive acknowledges were discussed in detail prior to and made an express condition of his promotion to Executive Vice President of Fabricated Construction Products. Executive acknowledges that the Board’s approval of Executive’s promotion to Executive Vice President of Fabricated Construction Products is conditioned upon Executive’s execution of this Agreement.

2. Compensation and Benefits During Employment. Nucor will provide the following compensation and benefits to Executive:

(a) Nucor will pay Executive a base salary of Three Hundred Forty Thousand Dollars ($340,000) per year, paid not less frequently than monthly in accordance with Nucor’s


normal payroll practices, subject to withholding by Nucor and other deductions as required by law. The parties acknowledge and agree that this amount exceeds the base salary Executive was entitled to receive in the Prior Position. Executive’s base salary is subject to adjustment up or down by the Board at its sole discretion and without notice to Executive.

(b) Executive will be a participant in, and eligible to receive awards of incentive compensation under and in accordance with the applicable terms and conditions of, Nucor’s senior officer annual and long term incentive compensation plans, as modified from time to time by, and in the sole discretion of, the Board.

(c) Executive shall be a participant in, and eligible to receive awards of equity-based compensation under and in accordance with the applicable terms and conditions of, Nucor’s senior officer equity incentive compensation plans, as modified from time to time by, and in the sole discretion of, the Board.

(d) Executive will be eligible for those employee benefits that are generally made available by Nucor to its executive officers.

3. Compensation Following Termination.

(a) From the date of Executive’s termination of employment with Nucor, whether by Executive or Nucor for any or no reason, and provided that Executive executes and returns to Nucor a separation and release agreement in form and substance satisfactory to Nucor, in its sole discretion, releasing any and all claims Executive has or may have against Nucor at the time of his termination of employment from Nucor, Nucor will pay Executive the Monthly Amount (as defined below) for twenty-four (24) months following Executive’s termination. The “Monthly Amount” shall be an amount equal to (i) the product of (A) the amount of Executive’s highest base salary level during the twelve (12) month period immediately prior to his date of termination, multiplied by (B) 3.36, (ii) divided by twelve (12). Subject to the provisions of Section 24 of this Agreement, the payments of the Monthly Amount shall be made at the end of each month following Executive’s termination of employment with Nucor on Nucor’s regular monthly payroll date.

(b) In exchange for Nucor’s agreement to pay the Monthly Amount as set forth in this Section 3, and other good and valuable consideration, including without limitation the compensation and benefits set forth in Section 2 of this Agreement, Executive agrees to strictly abide by the terms of Sections 8 through 13 of this Agreement.

(c) If Executive is employed by Nucor at the time of Executive’s death, Nucor’s obligations to make any payments of the Monthly Amount under this Agreement will automatically terminate and Executive’s estate and executors will have no rights to any payments of the Monthly Amount under this Agreement. If Executive dies during the first twelve (12) months following Executive’s termination from employment with Nucor, then Nucor will pay Executive’s estate the payments of the Monthly Amount due pursuant to Section 3(a) of this Agreement through the end of the twelfth (12th) month following Executive’s termination from employment with Nucor. If Executive dies twelve (12) or more months after termination of Executive’s employment with Nucor, then Nucor’s obligations to make any payments of the Monthly Amount under Section 3(a) of this Agreement will automatically terminate without the necessity of Nucor providing notice, written or otherwise.

 

2


(d) The amounts payable pursuant to this Section 3 of this Agreement shall be in addition to and not in lieu of any amounts payable to Executive pursuant to the Nucor Corporation Severance Plan for Senior Officers and General Managers (the “Severance Plan”), which payments, if any, shall be governed by the terms and conditions of the Severance Plan.

4. Duties and Responsibilities; Best Efforts. While employed by Nucor, Executive shall perform such duties for and on behalf of Nucor as may be determined and assigned to Executive from time to time by the Chief Executive Officer of Nucor Corporation or the Board. Executive shall devote his full time and best efforts to the business and affairs of Nucor. During the term of Executive’s employment with Nucor, Executive will not undertake other paid employment or engage in any other business activity without the prior written consent of the Board.

5. Employment at Will. The parties acknowledge and agree that this Agreement does not create employment for a definite term and that Executive’s employment with Nucor is at will and terminable by Nucor or Executive at any time, with or without cause and with or without notice, unless otherwise expressly set forth in a separate written agreement executed by Executive and Nucor after the date of this Agreement.

6. Change in Executive’s Position. In the event that Nucor transfers, demotes, promotes, or otherwise changes Executive’s compensation or position with Nucor, the restrictions and post-termination obligations set forth in Sections 8 through 13 of this Agreement shall remain in full force and effect.

7. Recognition of Nucor’s Legitimate Interests. Executive understands and acknowledges that Nucor competes in North America and throughout the world in the research, manufacture, fabrication, marketing, sale, distribution and/or placement of steel or steel products (including but not limited to flat-rolled steel, steel shapes, structural steel, light gauge steel framing, steel plate, steel joists and girders, steel deck, steel fasteners, metal building systems, wire rod, welded-wire reinforcement rolls and sheets, cold finished steel bars and wire, special quality bar products, guard rail, fabricated concrete reinforcement bars, and structural welded-wire reinforcement) or steel or steel product inputs (including but not limited to scrap metal and direct reduced iron ) (all such activities, collectively, the “Business”). As part of Executive’s employment with Nucor, Executive acknowledges he will continue to have access to and gain knowledge of significant secret, confidential and proprietary information of the full range of operations of Nucor. In addition, Executive will continue to have access to training opportunities, contact with vendors, customers and prospective vendors and customers of Nucor, in which capacity he is expected to develop good relationships with such vendors, customers and prospective vendors and customers, and will gain intimate knowledge regarding the products and services of Nucor. Executive recognizes and agrees that Nucor has spent and will continue to spend substantial effort, time and money in developing relationships with its vendors and customers, that many such vendors and customers have long term relationships with Nucor, and that all vendors, customers and accounts that Executive may deal with during his employment with Nucor, are the vendors, customers and accounts of Nucor. Executive acknowledges that Nucor’s competitors would obtain an unfair advantage if Executive disclosed Nucor’s Secret Information or Confidential Information (as defined in Sections 8 and 9, respectively) to a competitor, used it on a competitor’s behalf, or if he were able to exploit the relationships he develops as an employee of Nucor to solicit business on behalf of a competitor.

8. Covenant Regarding Nucor’s Secret Information. Executive recognizes and agrees that he will have continued access to certain sensitive and confidential information of Nucor (a) that is not generally known in the steel business, which would be difficult for others to acquire or duplicate without improper means, (b) that Nucor strives to keep secret, and (c) from which Nucor derives substantial commercial benefit because of the fact that it is not generally known (the “Secret Information”), including without limitation: (i) Nucor’s process of developing and producing raw material, and designing and

 

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manufacturing steel and iron products; (ii) Nucor’s process for treating, processing or fabricating steel and iron products; (iii) Nucor’s non-public financial data, strategic business plans, competitor analysis, sales and marketing data, and proprietary margin, pricing, and cost data; and (iv) any other information or data which meets the definition of “trade secrets” under the North Carolina Trade Secrets Protection Act. Executive agrees that unless he is expressly authorized by Nucor in writing, Executive will not use or disclose or allow to be used or disclosed Nucor’s Secret Information. This covenant shall survive until the Secret Information is generally known in the industry through no act or omission of the Executive or until Nucor knowingly authorizes the disclosure of or discloses the Secret Information, without any limitations on use or confidentiality. Executive acknowledges that he did not have knowledge of Nucor’s Secret Information prior to his employment with Nucor and that the Secret Information does not include Executive’s general skills and know-how.

9. Agreement to Maintain Confidentiality.

(a) As used in this Agreement, “Confidential Information” shall include all confidential and proprietary information of Nucor, including, without limitation, any of the following information to the extent not generally known to third persons: financial and budgetary information and strategies; plant design, specifications, and layouts; equipment design, specifications, and layouts; product design and specifications; manufacturing processes, procedures, and specifications; data processing or other computer programs; research and development projects; marketing information and strategies; customer lists; vendor lists; information about customer preferences and buying patterns; information about prospective customers, vendors and prospective vendors, or business opportunities; information about Nucor’s costs and the pricing structure used in sales to customers; information about Nucor’s overall corporate business strategy; and technological innovations used in Nucor’s business, to the extent that such information does not fall within the definition of Secret Information.

(b) During Executive’s employment with Nucor and at all times after the termination of Executive’s employment with Nucor, (i) Executive covenants and agrees to treat as confidential all Confidential Information submitted to Executive or received, compiled, developed, designed, produced, accessed, or otherwise discovered by the Executive from time to time while employed by Nucor, and (ii) Executive will not disclose or divulge the Confidential Information to any person, entity, firm or company whatsoever or use the Confidential Information for Executive’s own benefit or for the benefit of any person, entity, firm or company other than Nucor. This restriction will apply throughout the world; provided, however, that if the restrictions of this Section 9(b) when applied to any specific piece of Confidential Information would prevent Executive from using his general knowledge or skills in competition with Nucor or would otherwise substantially restrict the Executive’s ability to fairly compete with Nucor, then as to that piece of Confidential Information only, the scope of this restriction will apply only for the Restrictive Period (as defined below) and only within the Restricted Territory (as defined below).

(c) Executive specifically acknowledges that the Confidential Information, whether reduced to writing or maintained in the mind or memory of Executive, and whether compiled or created by Executive, Nucor, or any of its vendors, customers, or prospective vendors or customers derives independent economic value from not being readily known to or ascertainable by proper means by others who could obtain economic value from the disclosure or use of the Confidential Information. Executive also acknowledges that reasonable efforts have been put forth by Nucor to maintain the secrecy of the Confidential Information, that the Confidential Information is and will remain the sole property of Nucor or any of its vendors, customers or prospective vendors or customers, as the case may be, and that any retention and/or use of

 

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Confidential Information during or after the termination of Executive’s employment with Nucor (except in the regular course of performing his duties hereunder) will constitute a misappropriation of the Confidential Information belonging to Nucor. Executive acknowledges and agrees that if he (i) accesses Confidential Information on any Nucor computer system within thirty (30) days prior the effective date of his voluntary resignation of employment with Nucor and (ii) transmits, copies or reproduces such Confidential Information in any manner or deletes any such Confidential Information, he is exceeding his authorized access to such computer system.

10. Noncompetition.

(a) Executive hereby agrees that for the duration of Executive’s employment with Nucor, and for a period of twenty-four (24) months thereafter (the “Restrictive Period”), Executive will NOT, within the Restricted Territory, do any of the following:

(i) engage in, whether as an employee, consultant, or in any other capacity, any business activity (A) that is the same as, or is in direct competition with, any portion of the Business, and (B) in which Executive engaged in during the course of his employment with Nucor (any such activities described in this Section 10(a)(i), “Competing Activities”);

(ii) commence, establish or own (in whole or in part) any business that engages in any Competing Activities, whether (i) by establishing a sole proprietorship, (ii) as a partner of a partnership, (iii) as a member of a limited liability company, (iv) as a shareholder of a corporation (except to the extent Executive is the holder of not more than five percent (5%) of any class of the outstanding stock of any company listed on a national securities exchange so long as Executive does not actively participate in the management or business of any such entity) or (v) as the owner of any similar equity interest in any such entity;

(iii) provide any public endorsement of, or otherwise lend Executive’s name for use by, any person or entity engaged in any Competing Activities; or

(iv) engage in work that would inherently call on him in the fulfillment of his duties and responsibilities to reveal, rely upon, or otherwise use any Confidential Information or Secret Information.

(b) For purposes of this Agreement:

(i) The term “Restricted Territory” means Executive’s geographic area of responsibility at Nucor which Executive acknowledges extends to the full scope of Nucor operations throughout the world. “Restricted Territory” therefore consists of the following alternatives reasonably necessary to protect Nucor’s legitimate business interests:

(A) Asia, Australia, Western Europe, Eastern Europe (including Russia), the Middle East, South America, Central America and North America, where Executive acknowledges Nucor engages in the Business, but if such territory is deemed overbroad by a court of law, then

 

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(B) The United States, Canada, Mexico, Guatemala, Honduras, the Dominican Republic, Costa Rica, Colombia, Argentina and Brazil, where Executive acknowledges Nucor engages in the Business, but if such territory is deemed overbroad by a court of law, then;

(C) The United States, Canada and Mexico, where Executive acknowledges Nucor engages in the Business, but if such territory is deemed overbroad by a court of law, then;

(D) The contiguous United States, where Executive acknowledges Nucor engages in the Business, but if such territory is deemed overbroad by a court of law, then;

(E) Any state in the United States located within a three hundred (300) mile radius of a Nucor plant or facility that engages in any aspect of the Business, but if such territory is deemed overbroad by a court of law, then;

(F) Any state in the United States where a Customer or Prospective Customer is located.

(ii) The term “Customer” means the following alternatives:

(A) any and all customers of Nucor with whom Nucor is doing business at or immediately prior to the time of Executive’s termination of employment with Nucor, but if such definition is deemed overbroad by a court of law, then;

(B) any customer of Nucor with whom Executive or Executive’s direct reports had significant contact or with whom Executive or Executive’s direct reports directly dealt on behalf of Nucor at or immediately prior to the time of Executive’s last date of full time employment with Nucor, but if such definition is deemed overbroad by a court of law, then;

(C) any customer of Nucor with whom Executive had significant contact or with whom Executive directly dealt on behalf of Nucor at or immediately prior to the time of Executive’s last date of full time employment with Nucor but if such definition is deemed overbroad by a court of law, then;

(D) any customer of Nucor about whom Executive had obtained Secret Information or Confidential Information by virtue of his employment with Nucor and with whom Executive had significant contact or with whom Executive directly dealt on behalf of Nucor at or immediately prior to the time of Executive’s last date of full time employment;

Provided, however, that the term “Customer” shall not include any business or entity that no longer does business with Nucor without any direct or indirect interference by Executive or violation of this Agreement by Executive, and that ceased doing business with Nucor prior to any direct or indirect communication or contact by Executive.

(iii) The term “Prospective Customer” means any person or entity who does not currently or has not yet purchased the products or services of Nucor, but who, at or immediately prior to the time of Executive’s last date of full-time employment with Nucor has been targeted by Nucor as a potential user of the products or services of Nucor, and whom Executive or his direct reports participated in the solicitation of or on behalf of Nucor.

 

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(iv) The term “solicit” means to initiate contact for the purpose of promoting, marketing, or selling products or services similar to those Nucor offered during the tenure of Executive’s employment with Nucor or to accept business from Customers or Prospective Customers.

(c) Executive specifically agrees that the post-termination obligations and restrictions in this Section 10 and in Sections 8, 9, 11, 12 and 13 will apply to Executive regardless of whether termination of employment is initiated by Nucor or Executive and regardless of the reason for termination of Executive’s employment. Further, Executive acknowledges and agrees that Nucor’s payment of the compensation described in Section 3 is intended to compensate Executive for the limitations on Executive’s competitive activities described in this Section 10 and Sections 11 and 12 for the Restrictive Period regardless of the reason for termination. Thus, for example, in the event that Nucor terminates Executive’s employment without cause, Executive expressly agrees that the obligations and restrictions in this Section 10 and Sections 8, 9, 11, 12 and 13 will apply to Executive notwithstanding the reasons or motivations of Nucor in terminating Executive’s employment.

11. Nonsolicitation. Executive hereby agrees that for the duration of Executive’s employment with Nucor, and for the Restrictive Period, Executive will NOT, within the Restricted Territory, do any of the following:

(a) solicit, contact, or attempt to influence any Customer to limit, curtail, cancel, or terminate any business it transacts with, or products it receives from Nucor;

(b) solicit, contact, or attempt to influence any Prospective Customer to terminate any business negotiations it is having with Nucor, or to otherwise not do business with Nucor;

(c) solicit, contact, or attempt to influence any Customer to purchase products or services from an entity other than Nucor, which are the same or substantially similar to, or otherwise in competition with, those offered to the Customer by Nucor; or

(d) solicit, contact, or attempt to influence any Prospective Customer to purchase products or services from an entity other than Nucor, which are the same or substantially similar to, or otherwise in competition with, those offered to the Prospective Customer by Nucor.

12. Antipiracy.

(a) Executive agrees for the duration of the Restrictive Period, Executive will not, directly or indirectly, encourage, contact, or attempt to induce any employees of Nucor (i) with whom Executive had regular contact with at or immediately prior to the time of Executive’s last date of full time employment with Nucor, and (ii) who are employed by Nucor at the time of the encouragement, contact or attempted inducement, to end their employment relationship with Nucor.

(b) Executive further agrees for the duration of the Restrictive Period not to hire for any reason any employees described in Section 12(a) of this Agreement.

 

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13. Assignment of Intellectual Property Rights.

(a) Executive hereby assigns to Nucor Executive’s entire right, title and interest, including copyrights and patents, in any idea, invention, design of a useful article (whether the design is ornamental or otherwise), and any other work of authorship (collectively the “Developments”), made or conceived solely or jointly by Executive at any time during Executive’s employment by Nucor (whether prior or subsequent to the execution of this Agreement), or created wholly or in part by Executive, whether or not such Developments are patentable, copyrightable or susceptible to other forms of protection, where the Developments: (i) were developed, invented, or conceived within the scope of Executive’s employment with Nucor; (ii) relate to Nucor’s actual or demonstrably anticipated research or development; or (iii) result from any work performed by Executive on Nucor’s behalf.

(b) The assignment requirement in Section 13(a) shall not apply to an invention that Executive developed entirely on his own time without using Nucor’s equipment, supplies, facilities or Secret Information or Confidential Information except for those inventions that (i) relate to Nucor’s business or actual or demonstrably anticipated research or development, or (ii) result from any work performed by Executive for Nucor.

(c) In connection with any of the Developments assigned pursuant to Section 13(a): (i) Executive will promptly disclose them to Nucor’s management; and (ii) Executive will, on Nucor’s request, promptly execute a specific assignment of title to Nucor or its designee, and do anything else reasonably necessary to enable Nucor or its designee to secure a patent, copyright, or other form of protection therefore in the United States and in any other applicable country.

(d) Nothing in this Section 13 is intended to waive, or shall be construed as waiving, any assignment of any Developments to Nucor implied by law.

14. Severability. It is the intention of the parties to restrict the activities of Executive only to the extent reasonably necessary for the protection of Nucor’s legitimate interests. The parties specifically covenant and agree that should any of the provisions in this Agreement be deemed by a court of competent jurisdiction too broad for the protection of Nucor’s legitimate interests, the parties authorize the court to narrow, limit or modify the restrictions herein to the extent reasonably necessary to accomplish such purpose. In the event such limiting construction is impossible, such invalid or unenforceable provision shall be deemed severed from this Agreement and every other provision of this Agreement shall remain in full force and effect.

15. Enforcement. Executive understands and agrees that any breach or threatened breach by Executive of any of the provisions of Sections 8 through 13 of this Agreement shall be considered a material breach of this Agreement, and in the event of such a breach or threatened breach of this Agreement, Nucor shall be entitled to pursue any and all of its remedies under law or in equity arising out of such breach. If Nucor pursues either a temporary restraining order or temporary injunctive relief, then Executive agrees to expedited discovery with respect thereto and waives any requirement that Nucor post a bond. Executive further agrees that in the event of his breach of any of the provisions of Sections 8 through 13 of this Agreement, unless otherwise prohibited by law:

(a) Nucor shall be entitled to (i) cancel any unexercised stock options granted under any senior officer equity incentive compensation plan from and after the date of this Agreement (the “Post-Agreement Date Option Grants”), (ii) cease payment of any Monthly Amounts otherwise due hereunder, (iii) seek other appropriate relief, including, without limitation, repayment by Executive of any (A) Monthly Amounts already paid hereunder and (B) benefits already paid under any severance or similar benefit plans; and

 

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(b) Executive shall (i) forfeit any (A) unexercised Post-Agreement Date Option Grants and (B) any shares of restricted stock or restricted stock units granted under any senior officer equity incentive compensation plan that vested during the six (6) month period immediately preceding Executive’s termination of employment (the “Vested Stock”) and (ii) forfeit and immediately return upon demand by Nucor any profit realized by Executive from the exercise of any Post-Agreement Date Option Grants or sale or exchange of any Vested Stock during the six (6) month period preceding Executive’s breach of any of the provisions of Sections 8 through 13 of this Agreement.

Executive agrees that any breach or threatened breach of any of the provisions of Sections 8 through 13 will cause Nucor irreparable harm which cannot be remedied through monetary damages and the alternative relief set forth in Sections 15(a) and (b) shall not be considered an adequate remedy for the harm Nucor would incur. Executive further agrees that such remedies in Sections 15(a) and (b) will not preclude injunctive relief.

If Executive breaches or threatens to breach any of the provisions of Sections 10, 11 or 12 of this Agreement and Nucor obtains an injunction, preliminary or otherwise, ordering Executive to adhere to the restrictive period required by the applicable paragraph, then the applicable restrictive period will be extended by the number of days that have elapsed from the date of Executive’s termination until the time the injunction is granted.

Executive further agrees, unless otherwise prohibited by law, to pay Nucor’s attorneys’ fees and costs incurred in successfully enforcing its rights pursuant to this Section 15, or in defending against any action brought by Executive or on Executive’s behalf in violation of or under this Section 15 in which Nucor prevails. Executive agrees that Nucor’s actions pursuant to this Section 15, including, without limitation, filing a legal action, are permissible and are not and will not be considered by Executive to be retaliatory. Executive further represents and acknowledges that in the event of the termination of Executive’s employment for any reason, Executive’s experience and capabilities are such that Executive can obtain employment and that enforcement of this Agreement by way of injunction will not prevent Executive from earning a livelihood.

16. Reasonableness of Restrictions. Executive has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon Nucor under Sections 8, 9, 10, 11, 12, 13 and 15 and hereby acknowledges and agrees that the same are reasonable in time and territory, are designed to eliminate competition which would otherwise be unfair to Nucor, do not interfere with Executive’s exercise of his inherent skill and experience, are reasonably required to protect the legitimate interests of Nucor, and do not confer a benefit upon Nucor disproportionate to the detriment to Executive. Executive certifies that he has had the opportunity to discuss this Agreement with such legal advisors as he chooses and that he understands its provisions and has entered into this Agreement freely and voluntarily.

17. Applicable Law. This Agreement is made in, and shall be interpreted, construed and governed according to the laws of, the State of North Carolina, regardless of choice of law principles of any jurisdiction to the contrary. Each party, for themselves and their successors and assigns, hereby irrevocably (a) consents to the exclusive jurisdiction of the North Carolina State courts located in Mecklenburg County, North Carolina and (b) waives any objection to any such action based on venue or forum non conveniens. Further, Executive hereby irrevocably consents to the jurisdiction of any court or similar body within the Restricted Territory for enforcement of any judgment entered in a court or similar body pursuant to this Agreement. This Agreement is intended, among other things, to supplement the provisions of the North Carolina Trade Secrets Protection Act, as amended from time to time, and the duties Executive owes to Nucor under the common law, including, but not limited to, the duty of loyalty.

 

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18. Executive to Return Property. Executive agrees that upon (a) the termination of Executive’s employment with Nucor and within three (3) business days thereof, whether by Executive or Nucor for any reason (with or without cause), or (b) the written request of Nucor, Executive (or in the event of the death or disability of Executive, Executive’s heirs, successors, assigns and legal representatives) shall return to Nucor any and all property of Nucor regardless of the medium in which such property is stored or kept, including but not limited to all Secret Information, Confidential Information, notes, data, tapes, computers, lists, customer lists, names of customers, reference items, phones, documents, sketches, drawings, software, product samples, rolodex cards, forms, manuals, keys, pass or access cards and equipment, without retaining any copies or summaries of such property. Executive further agrees that to the extent Secret Information or Confidential Information are in electronic format and in Executive’s possession, custody or control, Executive will provide all such copies to Nucor and will not keep copies in such format but, upon Nucor’s request, will confirm the permanent deletion or other destruction thereof.

19. Entire Agreement; Amendments. This Agreement discharges and cancels all previous agreements regarding Executive’s employment with Nucor, including without limitation that certain Executive Agreement by and between Nucor Corporation and Executive dated as of September 30, 2010, and constitutes the entire agreement between the parties with regard to the subject matter hereof. No agreements, representations, or statements of any party not contained herein shall be binding on either party. Further, no amendment or variation of the terms or conditions of this Agreement shall be valid unless in writing and signed by both parties.

20. Assignability. This Agreement and the rights and duties created hereunder shall not be assignable or delegable by Executive. Nucor may, at its option and without consent of Executive, assign its rights and duties hereunder to any successor entity or transferee of Nucor Corporation’s assets.

21. Binding Effect. This Agreement shall be binding upon and inure to the benefit of Nucor and Executive and their respective successors, assigns, heirs and legal representatives.

22. No Waiver. No failure or delay by any party to this Agreement to enforce any right specified in this Agreement will operate as a waiver of such right, nor will any single or partial exercise of a right preclude any further or later enforcement of the right within the period of the applicable statute of limitations. No waiver of any provision hereof shall be effective unless such waiver is set forth in a written instrument executed by the party waiving compliance.

23. Cooperation. Executive agrees that both during and after his employment, he shall, at Nucor’s request, render all assistance and perform all lawful acts that Nucor considers necessary or advisable in connection with any litigation involving Nucor or any of its directors, officers, employees, shareholders, agents, representatives, consultants, clients, customers or vendors. Executive understands and agrees that Nucor will reimburse him for any reasonable documented expense he incurs related to this cooperation and assistance, but will not be obligated to pay him any additional amounts.

24. Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if (a) Executive is a “specified employee” under Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986 (the “Code”) as of the date of his separation from service and (b) any amount or benefit that Nucor determines would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable or distributable under this Agreement by reason of Executive’s separation from service, then to the extent necessary to comply with Code Section 409A:

 

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(i) if the payment or distribution is payable in a lump sum, Executive’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of Executive’s death or the seventh month following Executive’s separation from service, and (ii) if the payment, distribution or benefit is payable or provided over time, the amount of such non-exempt deferred compensation or benefit that would otherwise be payable or provided during the six (6) month period immediately following Executive’s separation from service will be accumulated, and Executive’s right to receive payment or distribution of such accumulated amount or benefit will be delayed until the earlier of Executive’s death or the seventh month following Executive’s separation from service and paid or provided on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments, distributions or benefits will commence.

For purposes of this Agreement, the term “separation from service” shall be defined as provided in Code Section 409A and applicable regulations, and Executive shall be a “specified employee” during the twelve (12) month period beginning April 1 each year if Executive met the requirements of Section 416(i)(l)(A)(i), (ii) or (iii) of the Code (applied in accordance with the regulations thereunder and disregarding Section 416(i)(5) of the Code) at any time during the twelve (12) month period ending on the December 31 immediately preceding his separation from service.

[Signatures Appear on Following Page]

 

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IN WITNESS WHEREOF, Executive and Nucor Corporation have executed this Agreement on the dates specified below.

 

EXECUTIVE
/s/ Raymond S. Napolitan

Raymond S. Napolitan

Date: 5-28-13

 

NUCOR CORPORATION
/s/ John J. Ferriola

John J. Ferriola

Chief Executive Officer and President

Date: 5-28-13

EX-10.3

Exhibit 10.3

CONSULTING SERVICES AGREEMENT

THIS CONSULTING SERVICES AGREEMENT (the “Agreement”) is entered into this day 23rd of April, 2013 (the “Effective Date”), by and among NUCOR CORPORATION, a Delaware corporation with its headquarters located in Charlotte. North Carolina (“Nucor”), THE CORPORATE DEVELOPMENT INSTITUTE, INC., a New Jersey corporation with its headquarters located in Charlotte, North Carolina (“CDI”) and JAMES D. HLAVACEK, a resident of North Carolina (“Hlavacek”, and together with CDI, collectively, the CDI Parties”). Nucor, CDI and Hlavacek are sometimes referred to herein as the Parties”, or individually as a Party”.

WHEREAS, Hlavacek, Chairman and CEO of CDI, has served on the Board of Directors of Nucor (the “Board”) since 1996;

WHEREAS, effective as of May 9, 2013, Hlavacek will no longer be a member of the Board; and

WHEREAS, following Hlavacek’s departure from the Board, Nucor would like to retain CDI, and through CDI, Hlavacek, as a consultant to provide Nucor with management and marketing training and consultation services (the Services”), and CDI desires to provide Nucor with such Services, subject to the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the mutual promises and undertakings set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1. CDI Services.

CDI shall provide the Services to Nucor from time to time at such times as requested by Nucor and reasonably acceptable to CDI. Nucor may provide to CDI certain technical matter, data and information necessary for the performance of the assigned Services. The CDI Parties acknowledge and agree that the Services shall be performed by and through Hlavacek, and Hlavacek’s disability, death or other inability to perform the Services shall be deemed a material default of the CDI Parties under this Agreement. Upon the expiration or earlier termination of this Agreement, CDI shall return all documents (originals and copies), data (regardless of medium), Nucor Confidential Information (as defined below), and Work Product (as defined below) to Nucor. The CDI Parties shall not retain any copies of Nucor Confidential Information or Work Product unless expressly authorized in writing by an executive officer of Nucor. Upon the expiration or earlier termination of this Agreement, Nucor shall return all CDI Confidential Information (as defined below), other than any such CDI Confidential Information incorporated into any Work Product (as defined below), to CDI. Nucor shall not retain any copies of CDI Confidential Information, other than any such CDI Confidential Information incorporated into any Work Product, unless expressly authorized in writing by CDI.

2. Consulting Fees.

Nucor will pay CDI $225,000 per each full calendar year during the Term (the CDI Annual Fees”). The CDI Annual Fees shall be payable by Nucor within 10 business days following the first day of each calendar month during the term in 12 monthly installments of $18,750 each beginning in June of 2013. Payment of the CDI Annual Fees shall entitle Nucor to receive 20 hours of Services from CDI during each calendar year of the Term. In the event Nucor desires to receive in excess of 20 hours of Services during any calendar year during the Term (“Excess Services”), CDI shall provide such excess Services at the rate of $12,000 per day of Excess Services provided to Nucor. Nucor will reimburse CDI, in accordance with Nucor’s policies, for all reasonable and documented travel, lodging and similar out-of-pocket expenses incurred by CDI in the performance of the Services hereunder within 30 days following a receipt CDI’s invoice therefor.


3. Confidentiality.

(a) Confidential Information Defined. For purposes of this Agreement, the term Nucor Confidential Informationshall include, but is not limited to, any and all of Nucor’s and its affiliates’ trade secrets and all other information and data of Nucor and its affiliates that is not generally known to third persons who could derive economic value from its use or disclosure, including, but not limited to, Nucor’s and its affiliates’ financial, business development and growth strategies, overall business strategy or market projections data, Nucor’s and its affiliates’ plant design, specifications, and layout; product design and specifications; processes, formulas, and methodologies; manufacturing (including but not limited to melting, casting, rolling, coating and fabrication) processes, procedures and specifications; equipment design, specification, layout, processes, and methodologies; data processing programs, research and development projects; product marketing, pricing, and cost data; customer identity, requirements, needs and specifications; and all information regarding the Work Product (as defined below) and the Services and all information obtained by either CDI Party pursuant to Hlavacek’s past service on the Board. During the course of Hlavacek’s service on the Board, Hlavacek has received and had access to, and during the course of providing the Services the CDI Parties may receive or have access to, Nucor Confidential Information. The CDI Parties acknowledge that Nucor owns all such Nucor Confidential Information. Notwithstanding the foregoing, Nucor Confidential Information shall not include any information that: (a) is identical to information which can be shown by clear and convincing written evidence to have been developed by a CDI Party or in a CDI Party’s possession prior to receipt of the same from Nucor, its affiliates or any of their respective representatives; (b) now is or hereafter becomes publicly known through no fault of a CDI Party; or (c) otherwise becomes available to a CDI Party from a third party that is not under any obligation of confidentiality to Nucor, its affiliates or any of their respective representatives.

For the purposes of this Agreement, the term CDI Confidential Information shall mean any and all of the CDI Parties’ trade secrets and all other information and data of the CDI Parties’ that is (x) not generally known to third persons who could derive economic value from its use or disclosure and (y) is clearly marked as “Confidential,” or if disclosed orally is confirmed as “Confidential” in writing within ten (10) days following such oral disclosure. During the Term Nucor may receive or have access to CDI Confidential Information. Nucor acknowledges that the CDI Parties own all such CDI Confidential Information. Notwithstanding the foregoing, CDI Confidential Information shall not include any information that: (i) is identical to information which can be shown by clear and convincing written evidence to have been developed by Nucor or its affiliates or any of their respective employees or representatives or in the possession of any such persons prior to receipt of the same from a CDI Party; (ii) now is or hereafter becomes publicly known through no fault of Nucor; or (iii) otherwise becomes available to Nucor or its affiliates or any of their respective employees from a third party that is not under any obligation of confidentiality to a CDI Party.

(b) Restrictions on Use / Disclosure. Except as strictly necessary in connection with the performance of the Services, each CDI Party shall hold Nucor Confidential Information in strict confidence, will not use or make any disclosures thereof (including methods or concepts utilized in the Nucor Confidential Information) without the express writtten consent of an executive officer of Nucor, and will take all reasonable steps to maintain the confidentiality of all Nucor Confidential Information. Each CDI Party shall treat the specific provisions of this Agreement as Nucor Confidential Information. Except to the extent necessary to use the Work Product (as defined below) for its own internal purposes.

 

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Nucor shall hold the CDI Confidential Information in strict confidence, will not make any disclosures thereof (including methods or concepts utilized in the CDI Confidential Information) without the express written consent of CDI, and will take all reasonable steps to maintain the confidentiality of all CDI Confidential Information.

(c) Legally Compelled Disclosures. In the event that a CDI Party or Nucor is required by any law, regulation, rule or order of any governmental body or agency to disclose any Nucor Confidential Information or CDI Confidential Information, as applicable, the CDI Parties or Nucor, as applicable, shall (i) give the other Party prompt notice of such requirement (or related request), (ii) consult with the other Party before making any such disclosure and (iii) cooperate fully with the other Party in such Party’s efforts, if any, to obtain a protective order or otherwise avoid disclosure of any such Nucor Confidential Information or CDI Confidential Information, as applicable. If, in the absence of a protective order, a CDI Party or Nucor, as applicable, is, in the written opinion of such CDI Party’s or Nucor’s outside counsel, compelled or required to disclose the Nucor Confidential Information or the CDI Confidential Information, as applicable, such CDI Party or Nucor, as applicable, may disclose such Nucor Confidential Information or CDI Confidential Information, as applicable, to the extent compelled or required to do so without liability hereunder.

4. No Public Announcements; Non-Disparagement.

(a) No CDI Party shall make any announcement or statement, written or oral, or release any information concerning Nucor or its affiliates, or their officers, employees or directors, regarding any of their respective policies or activities, to any member of the public, press, person, entity, or any official body, without the prior written consent of an executive officer of Nucor. The CDI Parties hereby further covenant and agree not to engage in, and to ensure that none of their employees, shareholders or representatives do not engage in, any conduct that is injurious to the reputation and interest of (i) Nucor, (ii) any affiliate of Nucor or (iii) any officer, employee, director, or representative of Nucor or any of Nucor’s affiliates, including but not limited to, disparaging, inducing or encouraging others to disparage, encouraging others to terminate or alter their business dealings with, or making or causing to be made any statement that is critical of or otherwise maligns the business reputation, business practices, services, management, or employment practices of such entities or persons.

(b) Provided that neither CDI Party has breached its obligations under Section 4(a) above, Nucor covenants and agrees not to engage in, and to ensure that none of its employees or representatives engage in, any conduct that is injurious to the reputation and interest of any CDI Party, including but not limited to, disparaging, inducing or encouraging others to disparage, encouraging others to terminate or alter their business dealings with, or making or causing to be made any statement that is critical of or otherwise maligns the business reputation, business practices, services, management, or employment practices of, a CDI Party.

5. Work Product.

The CDI Parties hereby covenant and agree that all processes, routines, methodologies, materials, technologies, documents, supporting work papers, designs, drawings, concepts, inventions, improvements, know-how, ideas, proposals, reports and strategies, whether fully or partially developed and/or completed, that are solely or jointly conceived, developed, or reduced to practice or writing by or with the aid of either CDI Party during the Term (as defined below) that relate in any manner, directly or indirectly, to Nucor’s or any of its affiliates’ business (collectively, the “Work Product”), shall be considered work(s) made by such CDI Party for hire for Nucor and shall belong exclusively to Nucor. The CDI Parties shall take (at Nucor’s expense) all actions reasonably requested by Nucor to fully vest Nucor with all right and title in and to the Work Product.

 

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6. Acknowledgment: Enforcement.

(a) The CDI Parties acknowledge and agree that the restrictions set forth in Sections 3-5 of this Agreement are fair and reasonable and are material terms of this Agreement. The CDI Parties agree that any violation of the covenants contained in Sections 3-5 will cause serious and irreparable damage to Nucor, the exact amount of which will be difficult to ascertain, and for that reason, Nucor shall be entitled, as a matter of right, to a temporary, preliminary and/or permanent injunction and/or other injunctive relief, ex parte or otherwise, from any court of competent jurisdiction, restraining any further violations by either CDI Party and that no bond need be posted in any such preceding or action. Such injunctive relief shall be in addition to, and in no way in limitation of, any and all other remedies Nucor shall have in law and equity for the enforcement of such covenants and provisions.

(b) In the event of the violation or breach by either CDI Party of any covenant contained in Section 3-5 hereof (or the violation or breach of such covenants by any of the employees, shareholders, or representatives of the CDI Parties whose compliance with such covenants the CDI Parties hereby expressly agree shall be their responsibility), (i) CDI shall forfeit and immediately return upon demand by Nucor any CDI Annual Fees received by CDI up to the date of such violation or breach, (ii) the CDI Parties shall, jointly and severally, indemnify and hold harmless Nucor from any cost or expense (including reasonable attorneys’ fees) arising out of such violation and (iii) Nucor may, effective upon its issuance of written notice to the CDI Parties, terminate this Agreement without any further liability or obligation to the CDI Parties.

7. Relationship of the Parties.

CDI shall be for all purposes an independent contractor of Nucor, and nothing herein shall cause either CDI Party to be, or to be deemed to be, an officer, director, employee, agent, partner or joint venturer of Nucor. CDI shall be responsible for the payment of any taxes (including federal and state income taxes, Social Security and Medicare contributions and similar taxes and assessments) of any type whatsoever that may arise out of this Agreement. It is agreed and understood that no CDI Party shall not be entitled to participate in any employee welfare, retirement, equity or other benefit plan of any type, whether written or oral, offered by Nucor.

8. Warranty.

The CDI Parties represent and warrant to Nucor that neither the Services nor the Work Product will violate (a) any confidentiality, non-use or non-disclosure obligations either CDI Party owes to any person or entity, or (b) infringe any patent, copyright, trademark, trade secret or other intellectual property or proprietary right of any person or entity.

9. Term; Termination.

Unless earlier terminated in accordance with the provisions hereof, the initial term of this Agreement shall commence on the Effective Date and terminate 3 years thereafter (the Initial Term); provided, however, in the event the CDI Parties and Nucor so agree in writing at least 45 days prior to the expiration of the Initial Term, the term of this Agreement will be renewed for an additional year (the Renewal Term,” and such Renewal Term (if any) together with the Initial Term, the Term”). The provisions of Sections 3-5 and 10 hereof shall survive any termination of this Agreement indefinitely.

 

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10. General Provisions.

(a) Choice of Law, Venue and Remedies. The Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina. Each Party, acting for itself and its successors and assigns, hereby expressly and irrevocably consents to the exclusive jurisdictions of the state courts located in Charlotte, North Carolina, for any litigation which may arise out of or be related to this Agreement. Each Party waives personal service of any and all process, and each consents that all service of process may be made by registered mail, return receipt requested, directed to a Party at its proper address. Each Party waives any objection based on forum non-conveniens or any objection to venue of any such action. Nothing contained in this Agreement shall limit, abridge, or modify the rights of Nucor under any statutes, including applicable trade-secret law (the North Carolina Trade Secrets Protection Act) or common law, or otherwise limit the remedies available to Nucor.

(b) Assignment; Waiver. Neither CDI Party shall assign this Agreement nor subcontract the whole Agreement or any part thereof, without the express written consent of Nucor. Failure by any Party at any time to require performance by the another Party or to claim a breach of any provision of this Agreement will not be construed as a waiver of any subsequent breach.

(c) Entire Agreement; Amendments; Counterparts. This Agreement sets forth the entire agreement and understanding of the Parties with respect to the subject matter hereof and supersedes all prior agreements, arrangements, and understandings related to the subject matter hereof. This Agreement may be amended, and any of the terms, provisions, covenants, representations, warranties, or conditions hereof may be waived, only by a written instrument executed by both Parties, or, in the case of a waiver, by the Party waiving compliance. This Agreement may be executed in one or more counterparts and by facsimile or pdf signature, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

(d) Severability. The Parties agree that if a court of competent jurisdiction deems any of the provisions or parts thereof in this Agreement too broad for the protection of Nucor’s legitimate interests or otherwise unenforceable, the Parties authorize the court to limit or modify the restrictions to the extent reasonably necessary to protect Nucor’s legitimate business interests. In the event such modification is impossible, the unenforceable provision or part thereof shall be deemed severed from this Agreement and every other provision or part thereof of this Agreement, including the remainder of the Section from which a provision or part thereof is severed, shall remain in full force and effect.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the Effective Date.

 

NUCOR CORPORATION  

/s/ John J. Ferriola

 
By:   John J. Ferriola  
Title:   President & CEO  

 

THE CORPORATE DEVELOPMENT INSTITUTE, INC.

/s/ James D. Hlavacek

 
By:   James D. Hlavacek  
Title:   Chairman and CEO  
/s/ James D. Hlavacek*    
James D. Hlavacek*   4/23/13
 

 

* Executed in his capacity as an individual.
EX-12

Exhibit 12

Nucor Corporation

2013 Form 10-Q

 

          

Computation of Ratio of Earnings to Fixed Charges

             
     Year-ended December 31,     Six Months
Ended
    Six Months
Ended
 
     2008     2009     2010     2011     2012     June 29,
2013
    June 30,
2012
 
     (In thousands, except ratios)        

Earnings

              

Earnings/(loss) before income taxes and noncontrolling interests

   $ 3,104,391      $ (413,978   $ 267,115      $ 1,251,812      $ 852,940      $ 305,660      $ 441,255   

Plus: (earnings)/losses from equity investments

     36,920        82,341        32,082        10,043        13,323        (413     6,832   

Plus: fixed charges (includes interest expense and amortization of bond issuance costs and settled swaps and estimated interest on rent expense)

     146,360        168,317        163,626        183,541        179,169        76,297        93,943   

Plus: amortization of capitalized interest

     300        962        2,332        2,724        2,550        1,468        1,539   

Plus: distributed income of equity investees

     20,117        7,373        4,923        3,883        9,946        7,708        3,884   

Less: interest capitalized

     (10,020     (16,390     (940     (3,509     (4,715     (1,407     (4,153

Less: pre-tax earnings in noncontrolling interests in subsidiaries that have not incurred fixed charges

     (314,277     (57,865     (73,110     (83,591     (88,507     (47,064     (45,576
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total earnings/(loss) before fixed charges

   $ 2,983,791      $ (229,240   $ 396,028      $ 1,364,903      $ 964,706      $ 342,249      $ 497,724   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed charges

              

Interest cost and amortization of bond issuance and settled swaps

   $ 144,845      $ 166,313      $ 162,213      $ 182,321      $ 178,218      $ 75,763      $ 93,453   

Estimated interest on rent expense

     1,515        2,004        1,413        1,220        951        534        490   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed charges

   $ 146,360      $ 168,317      $ 163,626      $ 183,541      $ 179,169      $ 76,297      $ 93,943   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratio of earnings to fixed charges

     20.39        *        2.42        7.44        5.38        4.49        5.30   

 

* Earnings for the year ended December 31, 2009 were inadequate to cover fixed charges. The coverage deficiency was $397,557.
EX-31

Exhibit 31

Certification of Principal Executive Officer

Pursuant to Rule 13a-14(a)/15d-14(a)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, John J. Ferriola, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Nucor Corporation;

 

  2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 7, 2013       /s/ John J. Ferriola
      John J. Ferriola
      Chief Executive Officer and President
EX-31.1

Exhibit 31.1

Certification of Principal Financial Officer

Pursuant to Rule 13a-14(a)/15d-14(a)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, James D. Frias, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Nucor Corporation;

 

  2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 7, 2013       /s/ James D. Frias
      James D. Frias
     

Chief Financial Officer, Treasurer

and Executive Vice President

EX-32

Exhibit 32

Certification of Principal Executive Officer

Pursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

I, John J. Ferriola, Chief Executive Officer and President (principal executive officer) of Nucor Corporation (the “Registrant”), certify, to my knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended June 29, 2013 of the Registrant (the “Report”), that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

/s/ John J. Ferriola
Name: John J. Ferriola
Date: August 7, 2013
EX-32.1

Exhibit 32.1

Certification of Principal Financial Officer

Pursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

I, James D. Frias, Chief Financial Officer, Treasurer and Executive Vice President (principal financial officer) of Nucor Corporation (the “Registrant”), certify, to my knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended June 29, 2013 of the Registrant (the “Report”), that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
/s/ James D. Frias
Name: James D. Frias
Date: August 7, 2013